snii_ar-2013_2014_low by Rocky Heath

an nu al

CENTRE HIGHLIGHTS

2013 2014 Turnover by SMMEs

Funding received

R3.5 SMMEs supported

million

SMMEs established

Jobs created: direct

million

Jobs created: indirect

36 11 37 81 Wo m

86%

ris

d enterpr

d enterp

ned enterp

14%

w s

85%

Blac

Yout

International NBIA Annual Conference The SNII team presented a paper on SNII’s Master Class Programme at the International Annual National Business Incubators Association (NBIA) Conference in Boston in April 2013. The programme was established and implemented externally with the Mandela Bay Development Agency’s Helenvale Urban Renewal Project. It was designed to provide unemployed youth with extensive training in computer literacy, personal development and entrepreneurial skills. The programme is coupled with six months’ workplace experience after completion of the course. Absa Your Money Novice Entrepreneur 2013 SNII was one of the sponsors for the Absa Your Money Novice Entrepreneur of the Year 2013. The initiative targets aspiring entrepreneurs between the ages of 17 and 35 who have a matric certificate and a new business idea. Buy Youth Initiative In partnership with the National Youth Development Agency and the Coega Development Corporation, SNII launched the Buy Youth Initiative in the third quarter of 2013/14. The initiative focuses on facilitating business deals between youth-owned enterprises and corporates who wish to increase their B-BBEE scorecard through the enterprise development and preferential procurement of the revised B-BBEE Act. Forty entrepreneurs were selected for the first phase of

the initiative. The group will also undergo training in areas like B-BBEE beneficiation, marketing and presentation skills, personnel development and technology in business training. The pitching session to corporates will be done in the new year. 9 companies graduated Nine companies graduated in the review period. Before they can graduate, businesses must demonstrate a solid understanding of the business; have a growth plan as well as a good pipeline of business. They must show a stable turnover and create jobs. The businesses which graduated will also go through the six-month SNII post-incubation programme which focuses on integration and community of practice. Eastern Cape Regional Productivity Award SNII beat 28 other companies from the province to claim the Productivity SA Public Sector Award and the bragging rights as the most productive organisation in the Eastern Cape. Relocation to new offices The move to new premises should enhance access to markets thus bringing the enterprises closer to commerce and industry as well as potential and existing clients. This accompanying business infrastructure should amplify the service offering of each incubated enterprise. This should have the intended effect of building the confidence of their own clients in them.

ABOUT SNII The Seda Nelson Mandela Bay ICT Incubator (SNII) creates competitive and viable small businesses in the ICT sector, thereby giving effect to the vision of its core funders - the Seda Technology Programme (STP) and the Nelson Mandela Bay Municipality (NMBM).

The organisation aims to build a steady pipeline of innovative small enterprises by forging high-value partnerships with Eastern Cape tertiary institutions within its reach. Its incubation programme is backed up by a system of consistent monitoring and evaluation processes.

The incubator is based in Port Elizabeth, Eastern Cape, South Africa and currently serves the greater Nelson Mandela Bay Metropolitan region. The incubation programme ensures that the fundamentals of supported organisations are in place. This allows SMMEs to ride out economic difficulties.

VISION

MISSION

VALUES

To be a leading ICT incubator developing globally competitive entrepreneur.

Transforming viable business ideas into sustainable enterprises through providing effective and efficient value-adding services, and creating an environment where highly motivated and innovative individuals thrive.

Agile | Creative | Knowledgeable

ORGANISATIONAL GOALS • Creating enterprises in the ICT sector - assisting in the start-up process including developing a business case, roll out and implementation with measurable and managed milestones. • Supporting enterprises in the ICT sector - through business development interventions, on-going in-house training, mentoring and coaching, quality assurance as well as research and development.

Business support

• Facilitation of entity registration • Feasibility studies to ensure long term sustainability • Provision of general and specialised business mentoring and coaching • Provision of structured training • Facilitation of access to funding • Facilitation of access to marketing and trade networks • On-going quality management systems

contents

Message of support

01 Chairman’s foreword

02 Board of Directors

03 Centre head report

04 Core team

05 Human resources management 31 06 Incubation programme

07 Corporate governance

08 Financial statements

INFRASTRUCTURE SUPPORT • Office space • Boardrooms and meeting rooms • Administration and clerical services

TECHNOLOGY SUPPORT • Connectivity • IT support • Telecommunications

business model

strategic dimension Effectiviness Efficienty Relevance

Sustainability Finance Stakeholder objectives

Impacts process

INPUTS

Outputs

Management skills Opportunities pre incubation

Entry Criteria

incubation

Exist Criteria

post incubation

Market assessment Feasibility assessment

Mentoring & coaching Training Business advice Financial support Access to markets Technology support

operational dimension

Integration Community of practice

MASTER CLASS & PRE-INCUBATION The pre-incubation and master class programme is three months long and is designed to support entrepreneurs converting their ideas into viable finished products or services with potential yield or benefits. The main contribution from the pre-incubation process is that it guarantees that companies entering the incubation process are ready to be developed. The centre assists

entrepreneurs with start-up requirements while building their business acumen and capacity of the business through access to the centre’s facilities such as: • Registration of entity • Feasibility study • General business management skills

INCUBATION FULL & VIRTUAL INCUBATION LAUNCHPAD Full incubation is a 24-month programme targeting This is a six-month programme targeting a newly entrepreneurs that need to be housed and require launched enterprise which has a business idea that the development that the centre has to offer. The can be commercialised. The centre assists through entity must be trading with a customer base and the following interventions: have minimal human resources in place. The centre assists with the following services: • Resource planning • Facilitating access to financing • Business plan implementation • Training and skills development • Specialised mentoring and coaching • Mentoring and coaching • In-house training • Strategic planning – business roll-out • Access to networks and markets • Marketing plan implementation (including access • Facilitating access to finance to market) • Quality assurance • Risk mitigation • Office facilities • Networking • Quality management systems

Virtual incubation is targeting an entity that does not need to be housed but requires the development programme the centre has to offer.

POST-INCUBATION This is a six-month programme designed for companies that graduate from the centre’s incubation programme. It primarily focuses on assisting business owners with:

• Successful integration of their businesses into the mainstream economy (migration from in-house resources to external facilities) • Planning for the growth of the business. • Establishing a community of practice which sees businesses that have graduated assisting new entrants in the incubation programme.

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message of support Siphiwo Soga Seda Technology Programme, Acting Executive Manager SNII has been a prime conduit of government’s enterprise development programmes as demonstrable in the centre’s governance systems, backed with an agile management team, and an impressive track record of graduated enterprises. This gives us confidence as partners in the readiness of SNII to expand its incubation programme to other areas beyond Nelson Mandela Bay.

Cllr Babalwa Lobishe Nelson Mandela Bay Municipality, Portfolio Chairperson: Economic Development, Tourism & Agriculture Our investment [as a metro] in the centre is creating real change as we are starting to see more black-owned entrepreneurs who graduate from the incubation programme becoming key players in the ICT industry. Hence much focus from 2014/15 will be on utilising the skills pool within SNII’s incubation programme as a means to transform the current state of ICT in Nelson Mandela Bay.

fo air rE ma w nâ&#x20AC;&#x2122; or s d Thando Gwintsa

Chairman’s Foreword

Thando Gwintsa

During the review period, the Board of Directors placed particular emphasis on strengthening governance as well as the incubator’s value proposition which had the intended effect of producing robust operational efficiencies. The focus on governance was crucial as it set the tone for inspired mandate delivery and lay the foundation for a responsive incubation programme which addresses specific needs of incubated businesses.

FINANCIAL PRUDENCE In this respect, I am delighted to announce that SNII has one again achieved an unqualified audit opinion. The organisation’s ability to maintain an unqualified audit opinion from its inception is testament to the sound governance structures and operational efficiencies which the board and management of SNII have worked tirelessly to uphold. In addition, SNII has broadened its board representation and brought in new members with incubation expertise such as Patricia Dlamini the chief executive officer of the Uitenhage-Despatch Development Initiative and Alex Qunta who is the Seda Amathole branch manager. This should further entrench SNII as an able steward of public funds and assets. It should continue to build public and funder confidence and become proof of the organisation’s continued financial prudence in an environment characterised by fiscal and budgetary constraints.

VALUE PROPOSITION The board’s resolve to reinforce the organisation’s governance structures as well as its value proposition is founded on the realisation that business incubation is a central pillar to addressing the triple challenges of economic growth, job creation and poverty alleviation. Business incubation is aimed at dealing with barriers to entry for small enterprises and is a necessary move away from big business. Incubation is also meant to play a central role in helping small business access markets. It is hoped that the organisation’s move to new premises toward the end of the review period should enhance market access opportunities for incubated enterprises. The growth of the small business sector is central to the economic and job creation growth prospects of the national and local economy. It is small business that creates jobs and wealth. Incubation focuses on growing job creators rather than job seekers. The future sustainability of all growing and developed economies is premised on the presence of an agile, innovative and energised small business sector. RESPONSIVE INCUBATOR Therefore, there exists an opportunity for incubators such as SNII to positively contribute to the Eastern Cape’s knowledge economy through a responsive incubation model by targeting enterprises in the ICT space. The objective is to use ICT platforms to create new information technology-based businesses and as a platform to solve problems in other sectors such as education and health. Business incubation often relies on the support of other partners, and in the case of SNII, job creation becomes a measurement indicator for funding prospects. This is despite the fact that job creation by incubated enterprises is realised in the long-term.

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The tightening and review of the organisation’s value proposition is based not only on the need to galvanise and produce a responsive incubation model, but one that lays the foundation for globally competitive entrepreneurs. For SNII to bear the desired results, it has to produce ICT businesses that can measure against their global counterparts. Products produced and services rendered at the centre must meet and exceed the requisite quality standards. The true test of the success of the incubation programme will be the organisation’s ability to produce entrepreneurs who are able to export their products and operate beyond the confines of South Africa and the Eastern Cape. OPERATIONAL HIGHLIGHTS However, I am pleased to report that the incubation model continues to produce admirable results. I am delighted that the organisation was able to assist a total of 36 enterprises at various stages of incubation. I am equally excited that these businesses created a total of 37 direct and 81 indirect jobs in a challenging operating environment. The board is also pleased that the incubated businesses generated a R5 million turnover despite new entrants to incubation formed the core of incubated enterprises. This should encourage potential funders to come on-board and infuse the necessary financial and other resources to stimulate economic growth and job creation. The performance of the enterprises lays a platform for improved growth prospects going into the new financial year. This is also encouraging, measured against total grant funding of R3.5 million from SNII’s core funders, the Nelson Mandela Bay Municipality and the Seda Technology Programme.

During the review period, the board impressed and reiterated to management that the majority of funding should go to the core business of incubation. The board is satisfied that 67% of the funds went to incubation, 7% to capital expenditure and 25% to corporate services. In this respect, the board is also encouraged that management has matured and it has a better understanding of the operational environment and it is able to identify the low-hanging fruit and those that speak to long-term growth and sustainability. Part of the board’s obligation is ensuring that incubated enterprises become sustainable and profitable ventures. The board is thus pleased that all incubated clients survived their first two years in business. This is a crucial phase for small business as the majority tend to fail in their first year of operation. This performance is effectively an affirmation of SNII’s incubation efforts and its ability to allow entrepreneurs to focus on their core business while the organisation takes care of the requisite supporting infrastructure. While the incubation programme continues to produce good results, there is also potential to expand the type of clientele into the programme. SOLUTIONS REPOSITORY SNII will continue to strive to become a more upstream and solutions-oriented business. It will strengthen existing relationships and establish new ones to also address the organisation’s funding needs. SNII’s alternative funding efforts will straddle across to the private sector and particular focus will be paid to ensuring that the business grows its own revenue streams for future sustainability. The very nature of business incubators has some reliance on other partners, hence collaboration and partnerships are a key ingredient.

â&#x20AC;&#x153;The organisation was able to assist a total of 36 enterprises at various stages of incubation. I am equally excited that these businesses created a total of 37 direct and 81 indirect jobs in a challenging operating environmentâ&#x20AC;?

SNII will continue to deliver on the expectation of current funders and partners such as the metro, Seda as well as the Department of Trade and Industry. FUTURE OUTLOOK Moving forward SNII will focus on creating and offering a high-value incubation platform. It will seek to grow a pipeline of quality entrepreneurs which will exploit opportunities within the value chain such as ICT components and commercial ICT solutions. There should be special focus on building the presence of the organisation, promoting and marketing in order to grow its pipeline. APPRECIATION I extend my gratitude to our partners the Nelson Mandela Bay Municipality, Seda Technology Programme, the Nelson Mandela Metropolitan University and the Nelson Mandela Bay Business Chamber. I wish to express my heartfelt gratitude to the SNII centre head Sipelo Lupondwana for his tireless efforts to ensure that the organisation lives up to its stated mandate as well as to his team for the enthusiastic disposition with which they discharge their work.

Thando Gwintsa Chairman of the board of directors

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There are times when a leader must move out ahead of the flock, go off in a new direction, confident that he is leading his people the right way. Nelson Rolihlahla Mandela

B OF OARD DIRE

CTORS Thando Gwintsa Lulama Mxenge Prof Jean Greyling Motse Mfuleni Alex Thandikhaya Qunta Patricia Dlamini Sipelo Lupondwana

SNII BOARD OF DIRECTORS

Thando Gwintsa Chairman of the Board of Directors Appointed: 2008

“The organisation’s ability to maintain an unqualified audit opinion from its inception is testament to the sound governance structures and operational efficiencies which the board and management of SNII have worked tirelessly to uphold.” Thando holds Masters Degrees in business administration, and safety, health and environmental management from the University of Southern Queensland, Australia. He is the executive manager in the office of the CEO at the East London Industrial Development Zone (IDZ). In this role, he provides strategic leadership support to the organisation, and ensures efficient management of the CEO’s office with regards to corporate governance, enterprise risk and quality management. He has been a key driver of strategic projects such as the East London IDZ Science and Technology Park in support of innovation in the province. Past employers include the Lesotho-based Medical Laboratory Sciences, Lesotho Highlands Water Project and Lesotho Highlands Development Authority (LHDA). A notable contribution he made while in the employ of LHDA was the development of a public health epidemiological baseline study for water and sanitation as well as the impact of health on resettling communities during the construction of a dam in Lesotho. He also chairs the Technical and Advocacy Committee of the Eastern Cape IT Initiative Board of Directors.

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Lulama Mxenge Deputy Chairperson of the Board of Directors Appointed: 2008

â&#x20AC;&#x153;The ripple effect of the centreâ&#x20AC;&#x2122;s operations is evident in the number of entrepreneurs that successfully complete the incubation programme; and importantly, the direct and indirect jobs created by incubated enterprises and which have been on a rise year-on-year.â&#x20AC;? Lulama holds a Masters in Business Leadership from the University of South Africa. As the Director for Economic Development and Recreational Services Sector at the Nelson Mandela Bay Municipality, she focuses on SMMEs and co-operatives as vehicles for participation in the mainstream economy. This involves creating an environment for participation of local communities in the mainstream economy, facilitating sustainable employment opportunities, and facilitating the development of skills among business owners and employees as a mechanism to enhance sustainable business practices and development. In this role, she also assists start-ups, emerging and established businesses with enterprise planning and development support, develops business support structures to cater for the varying needs of area-specific businesses. She also serves on the Board of Directors at the Seda Construction Incubator.

Prof Jean Greyling Chairman: Human Resources & Remuneration Committee Appointed: 2011

“The future success of SNII largely depends on attracting well-qualified IT students into the incubator. Hence it was encouraging to see 15 computer science students from NMMU being sponsored by SNII to attend the Eastern Cape 2013 ICT Summit in East London. It’s important to captivate the interest of students who can then form part of the centre’s pipeline.” Jean heads the computer science department at the Nelson Mandela Metropolitan University (NMMU). One aspect he drives, as head of department, is creating platforms and encouraging students to be involved in broader subject matters than the curriculum. Encouraging entrepreneurship is a key aspect of this. Jean holds a PhD in Computer Science and Information Systems from the University of Port Elizabeth (now part of NMMU). His PhD study involved compiling an automated selection battery to determine which first year students would successfully complete their computer science degrees. He has also done some research on the use of mobile phones in assisting people within a community.

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Motse Mfuleni Member: Human Resources & Remuneration Committee Appointed: 2008

“We are seeing a positive shift in the type and quality of businesses that are joining the incubator. This can be directly attributed to the team’s commitment to attract technically-competent entrepreneurs. The businesses have migrated from mainly web development and hardware sales to innovative IT solutions and developers. The quality of our enterprises should therefore bode well for large companies that can start looking to our SMMEs for their own enterprise development programmes.” Motse is the Group CEO of Imbizo Group which comprises Imbizo Events, Blackforest Media and Imbicom Telecoms. He is the National Secretary General of Black IT Forum, facilitator of the Eastern Cape Government ICT Strategy, and convener of the Eastern Cape ICT Summit. He also serves as Chairman of the BAY TV Board, is Vice President of the MICT SETA Board, and a member of Business Unity South Africa (BUSA). He holds a Bachelor of Theology from UNISA, and a management and development programme qualification from NMMU.

Alex Thandikhaya Qunta Member: Finance, Risk and Audit Committee Appointed: 2013

“It’s always a pleasure to watch enterprises progress through the different stages of incubation; especially seeing them reach the final milestone of being graduated from the programme. This gives us confidence in the growth trajectory of our incubated enterprises.” Alex is the branch manager of Seda Amathole and in this role he coordinates and manages the overall operations of the branch which are geared towards stimulating and supporting enterprises in the Amathole region. Before joining Seda, he was the acting head of the Business Studies department at the Port Elizabeth FET College (Russell Road Campus). Other roles include national examinations moderator for Marketing Research N6; SMME manager at the former University of Port Elizabeth and industrial advisor at the Eastern Cape Manufacturing Advisory Centre. He also serves on the Board of Directors of ASPIRE (Amathole Economic Development Agency), He holds a qualification in international trade and a Bachelor of Commerce (Honours) Degree in Business Management.

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Patricia Dlamini Member: Audit & Risk Committee Appointed: 2013

“Entrepreneurship is arguably one of the most important inputs in the economic development of any country. Small businesses drive economic growth, create employment, and are sources of innovation and new ideas. Hence business incubators such as SNII are pivotal in changing the socio-economic landscape through enterprise development.” Patricia is the CEO of the Uitenhage-Despatch Development Initiative (UDDI). Her extensive experience in incubation and enterprise development is evident in past positions such as executive manager of business incubator, the Eastern Cape IT Initiative (ECITI), and head of entrepreneurship development at Southern Africa’s first Science and Technology Park, The Innovation Hub in Pretoria. Currently reading for her Masters in Business Administration (MBA) with NMMU, Patricia holds a Bachelor of Commerce from the University of Swaziland, completed a programme in management development from the Gordon Institute of Business Sciences, and also holds an Incubator Management Certificate with the National Business Incubation Association (USA). She is the Vice Chairperson of the Southern Africa Business Technology Incubator Association (SABTIA) and currently serves as a non-executive member of the Eastern Cape Communication Forum.

Sipelo Lupondwana Centre manager (ex-officio board member) Appointed: 2011

â&#x20AC;&#x153;SNII is acutely aware that in a fastchanging global environment, it is not enough to merely become a world-class incubator. The organisation has to assume the posture of a melting pot of globallycompetitive entrepreneurs who are able to match up to the skills and talents of their peers from around the world. Hence in the review period SNII forged ahead with plans to establish its research and development laboratory to support the initiatives of its clients and those of the incubator.â&#x20AC;? Sipelo has been at the helm of the incubation centre for the past three years. As the accounting officer for the organisation, he is responsible for the overall development and implementation of the organisational strategy and plan. Having worked in the private and public sectors before joining the incubator, he brings extensive management experience in areas such operations, risk, performance, organisational design and business processes. He holds a Bachelor of Business Administration, a Diploma in Business Studies and is currently at work on his Masters in Business Administration with the Management College of Southern Africa. He also serves on the SABTIA Board of Directors.

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Be a yardstick of quality. Some people are not used to an environment where excellence is expected. Steve Jobs

ad Sipelo Lupondwana

CENTRE HEAD REPORT

Sipelo Lupondwana

I am pleased to present a synopsis of the performance of the Seda Nelson Mandela Bay ICT Incubator for the year ending March 2014. Following an in-depth organisational development exercise and the resultant structural changes in the previous year, SNII undertook a process which should consolidate its value proposition. This process resulted in a thorough assessment of the business operations and a streamlined understanding of the value proposition. The resultant effect is a responsive value proposition that is aligned to client needs and expectations. SOLID VALUE PROPOSITION In addition, the organisation also examined the performance of its incubation model which resulted in an assessment of each stage of incubation. This process sought to determine the performance of each incubation stage measured against the intended outcomes and to identify causes of client stagnation or stunted business growth. This process resulted in a more accurate realignment of resources to the needs of the model. As such, halfway through the financial year, the organisation held a strategic review and planning exercise for the new financial year. This review indicated that the organisation had successfully laid down the preparatory work for a responsive ICT incubator for globally competitive entrepreneurs. The organisation is acutely aware that in a fast-changing global environment, it is not enough to merely become a world-class incubator. The organisation has to assume the posture of a melting pot of globally competitive entrepreneurs who are able to match up to the skills and talents of their peers from around the world. In this regard, SNII forged ahead with plans to establish its research and development laboratory to support the initiatives of its clients and those of the incubator. SNII is thus pleased that one of its incubated enterprises was able to export its products in the period under review.

GLOBALLY COMPETITIVE The intended effect is to enhance the competitiveness of the organisation and that of its incubated enterprises. The establishment of this research and development facility should further position the incubator as an ICT solutions repository. This work should enhance the future growth prospects and the sustainability of the incubator as well as wean itself off its reliance on its funders. The organisation should be able to drive the varying but demanding aspects of its operations on its own. However, the organisation also put in place mechanisms that should ensure that clients are fully committed to the incubation programme and that they are delivering the desired returns. In this respect, at the end of the financial year, the organisation implemented a compliance scale which measures the commitment of incubated enterprises to the programme. Those enterprises that perform well are a lesser cost to the organisation. This compliance test should help identify stagnant clients and the reasons for non-compliance. Furthermore, SNII also placed special focus on ensuring the optimal use of its current financial and human resources. Instead of augmenting its human resources by hiring additional staff, SNII looked at what it has and how to use these resources optimally. As such, the organisation took a considered decision to align the specific skills and talents of its people to the needs of its clients. For example, the head of the incubation centre assists incubated enterprises with strategic issues while the enterprise development manager assists with mentoring and staffing matters. The enterprise systems office looks at research and development and quality management for clients

while the business development office assists clients with marketing and sales as well as coordinates training programmes. The financial office advises clients on financial management, systems and financial modelling. This allows the organisation to measure the outputs of its staff against client outcomes. The effects of this work is an organisation that is a lean and agile operation that is fit for purpose and effectively responds to the needs of its incubated enterprises. MANDATE DELIVERY I am therefore delighted to report that the aforementioned interventions have resulted in an admirable organisational performance. During the year, SNII supported a total of 36 enterprises in the various stages of incubation. A total of 12 were in full incubation (33%), seven at launch pad (19%), four at master class (11%), five at pre-incubation (14%), and eight at virtual incubation (22%). Collectively, these businesses created 37 direct and 81 indirect jobs during the period under review. Furthermore, the enterprises recorded a combined turnover of R5 million. This number is decidedly lower than the previous yearâ&#x20AC;&#x2122;s turnover of R7.5 million. This is because a number of established enterprises at full incubation graduated and exited the programme resulting in a decreased number of clients at full incubation stage. As such, the review period had a number of new entrants that are yet to test their products in the market. This performance is encouraging in relation to total organisational funding of R3.5 million from SNIIâ&#x20AC;&#x2122;s funders, the Nelson Mandela Bay Municipality and the Seda Technology Programme. About 57% of the funds went to enterprise development, 7% to capital expenditure and 25% to corporate services.

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The organisation is also confident that its move to new premises towards the end of the financial year should bring its clients closer to the market and address issues relating to access to markets. The business infrastructure should augment the service offering of each incubated enterprise thereby building the confidence of their own clients in them. I am equally excited that 100% of SNII’s incubated businesses survived their first and second years during the review period. This is particularly significant considering that five out of every seven new enterprises do not survive their first year. This means the incubation programme effectively addresses key issues relating to business sustainability. Four of the businesses are women-owned and 85% are owned by youth. A total of 86% are black-owned businesses. PRODUCTIVE ENGAGEMENTS In addition, SNII also engages in strategic partnerships that result in a more coordinated approach to small business development as well as fostering cooperation among state institutions. These engagements allow for cross-pollination and a shared platform for knowledge management. For example, as a result of the success of the PC and Entrepreneurial training facilitated by SNII between April 2013 and January 2014, Mandela Bay Development Agency’s (MBDA) Helenvale Urban Renewal Project (HURP) has again requested that SNII to provide computer skills training for 25 adults in the new year. SNII also continued with its master class programme which equips incubated businesses and external partners with an understanding of statutory requirements, soft skills and commitment to business. In this regard, SNII was contracted by MBDA to extend

this programme to 21 of its trainees. SNII was able to place 15 of these trainees at different companies for a six-month period. One of these trainees now forms part of SNII’s incubation programme. Three trainees received permanent employment at their host companies. SNII also hosted three workshops that were open to all supported clients, including those from other incubators. The organisation developed and facilitated a workshop at the request of the Coega Development Corporation in support of their SME development programme. The workshop was hosted at the Nelson Mandela Bay Business Chamber. The objective of the session was to highlight the importance of using technology to enhance business processes, increase competitiveness and efficiency in operations. A total of 25 delegates attended the workshop. SNII also held a workshop aimed at providing participants with guidance on how to build their business models. Clients had the opportunity to review their current business model. The organisation also hosted a design workshop in partnership with the South African Bureau of Standards (SABS). The aim of the workshop was to improve industry understanding and application of design, and to promote design as a value adding activity and integrate it into mainstream business and industrial processes of SMEs. The goal was to increase the competitiveness of small, medium enterprises (SMEs) in their product and service design application. The collaboration between the National Youth Development Agency (NYDA) “Buy Youth” initiative and the incubator resulted in a workshop for external non-incubation clients and incubated enterprises

“100% of SNII’s incubated businesses survived their first and second years during the review period. Four of the businesses are womenowned and 85% are owned by youth. A total of 86% are black-owned businesses”

Sipelo Lupondwana Centre Manager

to attend a black economic empowerment (BEE) workshop, that not only examined legislation but specifically the benefits for SMEs. FUTURE FOCUS Moving forward, SNII intends to strengthen its relationships with technology partners for maximum impact. The organisation will also focus on research and development to ensure that its laboratory is fullyfunctional and accredited by the fourth quarter of the new financial year. This should ensure that products produced by incubated enterprises are of requisite quality. The organisation will also encourage clients to expand their footprint and take their operations beyond the Eastern Cape to ensure that they are globally competitive. As such, SNII will continue to provide and agitate for platforms and channels which support this objective. APPRECIATION I would like to express my gratitude to the board of SNII for its steadfast support and its demonstrable commitment to building enterprises of the future with a global footprint. Its unrelenting pursuit of enhanced economic development impact through robust SMME support is appreciated. I would like to extend heartfelt gratitude to SNII’s core funders, the Nelson Mandela Bay Municipality as well as the Seda Technology Programme to whom we owe our existence. I would also like to commend our partners, the Nelson Mandela Metropolitan University, East London Industrial Development Zone and organised business for their continued support. Finally, I would like to extend my appreciation to the SNII team and the incubated enterprises for their demonstrated commitment to the programme.

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If everyone is moving forward together, then success takes care of itself. Henry Ford

am Ellen Fischat Bulelwa Mafani Dane Blake Gobey Nosipho Mkhosana

core team

Ellen Fischat Enterprise development manager Appointed: 2011

Bulelwa Mafani Enterprise systems officer Appointed: 2013

The success of our Master Class Programme which combines entrepreneurial training with personal development and connects business and trainees has been my most notable contribution this past year. Our work in this area led to an invitation to present our programme at the National Business Incubators Association (NBIA) International Annual Conference in Boston in April 2013. It has also sparked local development agencies to utilise our programme to offer educational upliftment to their beneficiaries.

Since at the core of the incubator is to help individuals convert their business ideas into viable ventures, my past experience in software development and analysis of business processes has assisted me in steering the incubator and its clients towards real success. In my role I have been exposed to the diverse aspects of enterprise development; from mentoring SMMEs to helping them diagnose potential opportunities and threats in order to ensure longevity of the fruits of their ideas.

Dane Blake Gobey Financial officer Appointed: 2013

Nosipho Mkhosana Business development officer Appointed: 2007

Having worked for only large corporations prior to joining SNII, I have since learned the powerful role SMMEs play within our economy and how their needs differ from the larger corporations. My most notable contribution as SNIIâ&#x20AC;&#x2122;s financial officer has been providing financial analysis not only of the centre but of our clients too and implementing a compliance scale within SNIIâ&#x20AC;&#x2122;s bouquet of business and management services.

Business development officer resigned in December 2013. The position will be filled in the first quarter of 2014/15.

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What new technology does is create new opportunities to do a job customers want done. Tim Oâ&#x20AC;&#x2122;Reilly

HU RESOURM MANAGE AN C MENTES

Organogram Employment equity Appointments Resignations Internships Training and development

HUMAN RESOURCES MANAGEMENT Organogram Board of Directors

HR & Remuneration Committee

Finance & Audit Committee

Centre Manager

Enterprise Development Manager

Enterprise Systems Officer

Business Development Officer

Receptionist /Admin

Financial Officer

Personal Assistant

Employment equity Total number of employees (including non-permanent employees) in each occupational category as at 31 March 2014. Occupational categories Senior officials and managers Professionals Clerks TOTAL PERMANENT Non – permanent employees GRAND TOTAL

A 1

Male C 1

Appointments

Female I

A 2 2 4 4 7

C 1

1 1

Total I

W 2 3 2 7 5 11

Internships

The Enterprise Systems Officer was appointed in SNII took on four interns in the review period: July 2013. • Four business analysts sourced through FASSET (the Sector Education and Training Authority for Finance, Accounting, Management Consulting and other Financial Services). This was in part in collaboration with Rhodes University and Delloite. For the period under review SNII’s retention rate stayed constant at 86%.

Retention rate

Resignations The Business Development Officer resigned in December 2013.

Vacancy Rate SNII’s vacancy rate for the period under review stayed constant at 14%

Training and development Table 5.4.1 Training provided and staff attendance as at 31 March 2014. Training provided Small business consultancy

Project management Sales and marketing Office administration

Attendance Enterprise development manager Business development officer Finance officer Enterprise development manager Business development officer Receptionist/admin assistant

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I believe in innovation and the way that you get innovation is that you fund research and learn the basics. Bill Gates

CU PROGRA

BATION MM

E The external environment and centre operations Our entrepreneurs ENTERPRISE SUCCESSES CENTRE HIGHLIGHTS

INCUBATION PROGRAMME The external environment and centre operations

The period under review placed special emphasis on improving the outcomes of the incubation programme such that it responds to the most pressing needs of incubated enterprises. Significant time, effort and resources were dedicated to ensuring that it lives up to its purpose of creating sustainable, profitable, world-class as well as globally-competitive entrepreneurs. Significant progress has been made in ensuring that SNII remains responsive to the needs of its enterprises. The success of incubation is a central plank to economic development and at the epicentre of the industrialisation of South Africa.

Incubation has gained traction across the globe as a reliable platform to ensure that small businesses are given the support and resources necessary for them to focus on their operations while building sound financial and operational efficiencies. It is significant that SNII has unrelentingly pursued the research and development aspect in its incubation programme. Research and development should ensure that SNII enterprises are globally-competitive and are able to match the skills and expertise of their global counterparts. It ensures that the centre produces quality small businesses and products. The organisation is pleased that one of its enterprises has started exporting its products to SADC countries (South African Development Community). The true test of the incubation programmeâ&#x20AC;&#x2122;s success lies not only in sustainability and financial efficacy, but also in the ability of its enterprises to trade beyond the borders of the province and those of South Africa. Their ability to compete against global counterparts will be testament to the importance of such incubation initiatives. Sustainability is a crucial pillar of incubation. SNII is delighted that 100% of its enterprises survived their

first and second year of business. This is a significant milestone because it is common cause that a significant number small businesses do not survive their first year. The number is put at five out of seven new businesses that do not survive their first year. It indicates that the organisation is moving closer towards realising its vision of becoming an innovative and inspired world-class incubator with globally competitive entrepreneurs. This success is an indication of a working incubation programme which is responding to the most urgent needs of its clients. Furthermore, the Absa SME Index 2013 titled â&#x20AC;&#x153;Growth in youth entrepreneurship is encouragedâ&#x20AC;? indicates that just over a quarter of business owners are under the age of 35. It states that there are 567 000 business owners who state their age as less than 35 years and 72% of these are self-employed. The youth make up 20% of all employers. In this respect, four of SNII businesses are women-owned and 85% are owned by youth. A total of 86% are black-owned businesses. The organisation is delighted that the youth continue to make up the majority of incubated business.

It is no secret that a robust SMME sector is a major catalyst for economic growth and development as well as sustainable job creation. In its State of Entrepreneurship in South Africa 2013 report, the Gordon Institute of Business Science (Gibs) states that through innovation, entrepreneurs create new, competitive markets and businesses which lead to job creation and have a multiplier effect on the economy. It states that entrepreneurship empowers citizens and it is required for any emerging market to move forward and successfully integrate into the global economy. “The most competitive nations are those that have the highest level of entrepreneurial activity. Small and medium size businesses tend to be the greatest creators of wealth in emerging economies,” says the Gibs report. SNII is pleased that through its incubation programme, it is playing an important role in reviving a local and national economy facing serious structural challenges and stunted growth. For example, incubated enterprises created a total of 37 direct and 81 indirect jobs during the period under review. Furthermore, these enterprises generated R5 million in revenue during the same period. Revenues generated this year are lower than the previous year’s turnover of R7.5 million. This can be largely attributed to the decreased number of companies at full incubation. This is because three enterprises at this level graduated and exited the programme. They have been replaced by new entrants into the programme whose products are still to be fully tested in the market. SNII extended its support to 36 enterprises in the various stages of incubation during the review period. Twelve were in full incubation (33%), seven at launch

pad (19%), 4 at master class (11%), 5 at pre-incubation (14%), and eight at virtual incubation (22%). In addition one of the incubated businesses, Gunu, which specialises in mobile applications and web development received an amount of R108 000 in seed funding for a national launch of its mobile application from the Nelson Mandela Metropolitan University (NMMU). The business received general business mentorship, strategy support, legal advice for contracts for seed funding and business development support to enable linkages to corporate clients. The university has also acquired 9% equity with the approval of the seed funding. The company launched their mobile application “School Times” at NMMU to 21 schools. The application allows schools to create an online newsletter with current information. It can be downloaded at no cost. The organisation is also grateful to its primary funders, the Nelson Mandela Bay Municipality and the Seda Technology Programme for their continued support. During the review period, SNII received a total of R3.5 million in grant funding. The majority of the funds went to the core business encapsulated in the enterprise development function, 67%, 7% to capex and 25% to corporate services. In the last quarter of the year, SNII relocated to new offices. The organisation believes that these new premises should enhance access to markets thus bringing the enterprises closer to commerce and industry as well as potential and existing clients. This accompanying business infrastructure should amplify the service offering of each incubated enterprise. This should have the intended effect of building the confidence of their own clients in them.

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Our entrepreneurs Enterprises at various stages of incubation as at 31 March 2014

Pre Incubation 5 entrepreneurs

BATI

vir t

ua l

Africloud Internet service provider Joined SNII: 2014

SS LA

io at

MA S T E

U IN C

LUmu WebDev Web development Joined SNII: 2013 Pyrography Multimedia Joined SNII: 2013 UL L

N AU

PAD CH

JST SOLUTIONS Fleet management solution Joined SNII: 2012

Tshiwu Trading Internet café Joined SNII: 2013

Master Class

4 entrepreneurs D Griffiths Multimedia Joined SNII: 2013 Pewuzone Multimedia Joined SNII: 2013 Sinethemba Fleet management solution Joined SNII: 2013 The Office Block Internet Café Joined SNII: 2013

IO AT

L N

Lanchpad

Full incubatioN

7 entrepreneurs A&A Solutions IT solutions Jobs created: 2 permanent Established: 2013 Joined SNII: 2012 AppIT Technologies Application & software development Established: 2014 Joined SNII: 2013 Gunu Application & software development Jobs created: 6 (2 permanent & 4 contract) Established & joined SNII: 2012 Livecode Software development & IT support Established: 2011 Joined SNII: 2012

12 entrepreneurs Millbug Hardware development Jobs created: 2 permanent Established & joined SNII: 2012 Mybytes Software development & web design Established & joined SNII: 2012 New Phase Electronic security systems Established: 2010 Joined SNII: 2012

AM Group IT Automation & electronic engineering Jobs created: 15 (5 permanent & 10 contract) Established: 2008 Joined SNII: 2012 Ayoba Technologies IT training Jobs created: 2 Established: 2012 Joined SNII: 2013 Blackout Advertising Advertising & graphic design Established: 2008 Joined SNII: 2009

IMUst Software Solutions Software & web development Jobs created: 1 permanent Established: 2008 Joined SNII: 2009 Mzansi Telecommunications Telephony & IT support Jobs created: 2 contract Established: 2009 Joined SNII: 2011 Perfect Solutions Graphic design & multimedia Jobs created: 1 permanent Established: 2009 Joined SNII: 2010

Deoglynn Training Solution Electronic security systems Jobs created: 7 (5 permanent & 2 contract) Established: 2009 Joined SNII: 2014 annual report 2013 | 2014

Virtual incubation:

Post incubation

Emambozana Computer Studios Skills Initiative Multimedia & film IT training Jobs created: 7 Jobs created: 4 permanent (3 permanent & Established & 1 contract) joined SNII: 2013 Established: 2007 Joined SNII: 2013 Uniz Software Comtech IT development Electronic security Established & systems joined SNII: 2012 Jobs created: 1 Joined SNII: 2012 Wafe Internet Café CyberCubes Café Internet café Internet Café Jobs created: 4 Established: 2007 permanent Joined SNII: 2012 Established & joined SNII: 2013 DJBT Consulting/ HobbyTronics PCB board design & components manufacturing Established: 2009 Joined SNII: 2012

Shoot97 Productions Multimedia & film Jobs created: 1 Established: 2006 Joined SNII: 2007

7 entrepreneurs Siya Sakuba and Associates Online marketing & training Jobs created: 1 permanent Established: 2008 Joined SNII: 2013 Truesight Communications Communication Jobs created: 7 Established: 2008 Joined SNII: 2011 Virtucomp IT systems security & eWaste Jobs created: 2 Established: 2012 Joined SNII: 2013

Bran Systems IT & automation solutions Jobs created: 3 (2 permanent & 1 contract) Established: 2009 Joined SNII: 2010 Rockstar Media Multimedia, videography & animation Jobs created: 1 permanent Established: 2006 Joined SNII: 2009

ENTERPRISE SUCCESSES

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AM Group Anda Maqanda is a beacon of hope for thousands of budding youths who look to venture into business. At 29, he holds Masters Degrees in electrical engineering and business administration and owns sought-after engineering consulting firm AM Group with premium clients which include the likes of Transnet, Eskom, Anglo American and De Beers. In 2013, Anda was announced the winner of youth entrepreneurship programme SAB KickStart. The prize included a R500 000 grant for his business and an international business learning trip to Beijing, China. This is in addition to an initial grant of R157 000 which he received for his business after reaching the national and final phase of the SAB KickStart earlier in 2013. Anda explains that the learning trip to China was an invaluable experience “where I established new business networks and also learnt about upcoming technology”. He founded AM Group in 2008 after six years working in private and stateowned enterprises around the country. The business, which he started with an office in Port Elizabeth in 2008,

now employs 25 staff members and has offices in Cape Town and Johannesburg. The company offers a range of engineering solutions with a special focus on engineering consulting, design and construction of electrical overhead power lines, renewable energy, automation and research and development. “Moving our Port Elizabeth office into the incubator in 2012 has enabled me to focus on growing the business outside the province. The facilities are ideal and we also enjoy the positive affiliation with the incubator. In the new year, “my focus will be on establishing specialised companies (such as renewable energy and power infrastructure) under AM Group as the holding company. The idea is to introduce share options for long-term serving employees. “Hiring qualified personnel is one hurdle we overcame in the review period, hence the concerted effort to retain skills by exploring the share option as one way to retain scarce skills.

Founder: Anda Maqanda Industry: IT Automation and electronic engineering Established: 2008 Offices: In-house resident at SNII (Port Elizabeth), Johannesburg and Cape Town Jobs created: 15 Notable achievement in 2013/14: 2013 SAB Kickstart winner Future plans: Diversifying the company

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Ayoba Technologies Within one year of establishing Ayoba Technologies, the company shows that it has the key ingredients to set it on course for sustainable growth.

Director: Nomaxabiso Klaas Industry: IT and business training Established: 2012

Established by Nomaxabiso Klaas and Archie Hlongwa in 2012, the duo spent much time in the review period setting up systems, developing training materials and sorting out registration and accreditation with MICT Seta (the Media, Information and Communication Technologies Sector Education and Training Authority). “We are now beginning to see the fruits of our labour,” says Nomaxabiso.

Offices: In-house resident at SNII (Port Elizabeth)

“Clinching a training contract with NMBM is a remarkable highlight for us.

Jobs created: 2

“The venture into business has also had a fair share of its challenges,” she adds, “but the support from SNII has cushioned us from a potentially strenuous start-up process.”

Notable achievement in 2013/14: Securing training contract with Nelson Mandela Bay Municipality (NMBM) Future plans: Promoting the business

Nomaxabiso explains that in the first year the company received training contracts mainly from the public sector. However, “there is real business potential within the SMME space and rural areas,” she says.

“Government’s skills development drive presents us with an opportunity to approach small businesses to train their staff and in turn help them increase their broad-based black economic empowerment (B-BBEE) scorecard through the skills development component of the revised B-BBEE Act. “We are also exploring training prospects in rural areas. This is also in line with government’s agenda to improve literacy and skills levels of people living in rural areas,” she ends. Looking ahead, the partners will focus on promoting the company’s offering. Besides IT and business training programmes, the company is also a supplier of hardware and software, and also provides IT support services. Ayoba Technologies also has partnerships with Microsoft, Intel, Dell, and Esquire, among other leading IT companies.

LA UN

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Gunu Two computers science students from the Nelson Mandela Metropolitan University (NMMU), Martin Stolk and Cornelius Greyling, are starting to see the rewards of working through the night developing their mobile app School Times. The app, which can be downloaded by users at no cost, enables schools to create an online newsletter and provides easy access of information to learners and parents. With seed funding from NMMU amounting to R108 000, the partners were able to successfully launch School Times at an international conference for IT and education in Johannesburg in July 2013. The university acquired 9% equity with the approval of seed funding and “this shows their confidence in our product,” says Cornelius. Already six schools are using the app; four in PE namely, Diaz Primary, Linkside High School, Theodor Herzl and Kabega Park Primary, as well as Kirkwood Primary (located outside PE), and Gill College in Somerset East.

assignments, we also have to make time for the business. “My main focus is marketing our app and overseeing business analysis projects we secure from time to time, and my partner (Martin) is in charge of all development done in the company. “Our participation in the incubation programme has helped us secure a private investor and connect us to the right industry contacts. SNII has helped to move us forward, from a duo with ideas to a business with tangible products that are attracting the market,” ends Cornelius.

Director: Cornelius Greyling Industry: Application and software development Established: 2012

The duo registered the company straight after high school in 2012. Besides their mobile app they also write software and also provide business analysis services.

Jobs created: 6 Notable achievement in 2013/14: Securing seed funding from NMMU for launch of mobile app Future plans: Growing the business

The partners are both at their second year of studies and “in between attending lectures, writing tests and

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MA S T E R C

LAS

PR EI

UB ON ATI

JST SOLUTIONS Running the operations of a taxi rank manually could be a thing of the past, thanks to the android mobile app Taxi Move targeted at taxi owners and rank managers.

Partner: Thulani Mkhohli Industry: Fleet management solutions Established: 2012 Notable achievement in 2013/14: Successful pilot of the Taxi Move mobile app Future plans: Developing a card payment system for taxi commuters

The brainchild of three NMMU IT graduates, Jacques Labuschagne, Sheryl Coz and Thulani Mkohli, Taxi Move has multiple functions such as timekeeping of taxis arriving and leaving the rank, as well as document management and administration which is particularly for rank managers. The app is aimed at curbing inefficiencies and maximising operations. Although the minibus taxi industry accounts for 65% of the public transport sector (20 million daily public transport users), “we found that taxi owners cannot monitor their operations. We recognised this gap in the public transport market and decided to exploit it. Our app is therefore designed to assist them to monitor their operations effectively,” explains Thulani. Piloted last year at NMMU, the partners have made a firm commitment to see their app reaching commercial stage. In the new financial year, they plan to launch the app with one taxi association in Port Elizabeth.

Other plans include incorporating an electronic (card) payment system that could be used by commuters instead of paying cash. “We are very grateful for the opportunities we are accessing through SNII. Attending the Eastern Cape 2013 ICT Summit for instance provided both networking opportunities and business connections,” says Thulani.

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Virtucomp With assistance from the Department of Trade and Industry (the dti) and the Independent Development Corporation (IDC), Virtucomp is at work on a business case to setup an electronic demanufacturing facility, a first of its kind in South Africa. “The facility will provide a legal and green avenue for handling electronic waste, targeting the import market initially, while establishing the local market,” says Virtucomp owner, Enrico Vermaak. Electronic waste is regarded as discarded computers, office electronic equipment, entertainment device electronics, mobile phones, television sets and refrigerators. It includes used electronics which are destined for reuse, resale, salvage, recycling or disposal. “Some electronic scrap components may contain contaminants and hazardous materials which by law must be disposed of in an environmentallyfriendly manner,” explains Enrico. “Our relationship with the dti and IDC can be attributed to SNII’s positive contribution to my business. Besides benefiting from the centre’s business

networks, we also have access to resources such as available grants for SMMEs. Virtucomp’s offering also includes specialised information security services (such as firewalls, intrusion prevention systems and endpoint protection), as well as on-site and remote ICT support services. In the review period, the company secured contracts with the East London IDZ, Coega Development Corporation and NMMU.

Director: Enrico Vermaak

Virtucomp was established by Enrico in 2012 after 12 years in different roles at Di Data. The company is a proud member of e-Waste Association of South Africa which ensures the company complies with industry best practice and latest recycling techniques.

Industry: IT systems security and e-waste Established: 2012 Jobs created: 2 Notable achievement in 2013/14: Securing contracts with, Coega Development Corporation, EL IDZ and NMMU Future plans: Setting up South Africa’s first electronic demanufacturing facility

annual report 2013 | 2014

Someone is sitting in the shade today because someone planted a tree a long time ago. Warren Buffett

CORPORATE

GOVERNAN

CE BOARD COMPOSITION AND RESPONSIBILITIES BOARD MEETINGS AND ATTENDANCE

CORPORATE GOVERNANCE

SNII endorses the code of corporate practices and conduct as contained in the King Reports on Corporate Governance, and affirms its commitment to comply in all material respects with the principles incorporated in these reports. The organisation further subscribes to the corporate governance principles set out in the Public Management Finance Act (PFMA) and the Municipal Finance Management Act (MFMA). SNII is committed to good corporate citizenship and organisational integrity in the running of its affairs. This commitment provides the shareholder, customers and stakeholders with the comfort that the affairs of the organisation are being managed in an ethical and disciplined manner.

BOARD COMPOSITION AND RESPONSIBILITIES The SNII Board of Directors is principally responsible for overall policy making, planning, budgeting and evaluating the performance of the organisation. The board has two committees; the human resources (HR) and remuneration, and audit and risk committees. The committees have delegated responsibilities and are required to provide full reports to the board upon matters referred to them.

The board committees are an extension of the Board of Directors, and assist the board in the execution of its duties. Unless otherwise stated, the committees perform an advisory role to the board. The committees are accountable to the full board to properly consider and evaluate any matter that it has to deal with or that is referred to it.

Human Resources (HR) and Remuneration Committee In accomplishing its assigned responsibilities, the HR and Remuneration Committee performs the functions listed hereunder and any such matters as may warrant its attention: • The organisation’s performance in relation to best practice principles of employment practices; • Internal promotion of employees; • Ensuring that the committee incorporates the fundamentals as set out in the Basic Conditions of Employment Act No. 75 of 1997; • The organisation’s remuneration strategy, internal controls and reporting systems (including establishment and maintenance), evaluating and reporting on effectiveness and identifying and rectifying significant deficiencies; • Compliance with the company’s code of ethics, code of conduct and other material policies; • The organisation’s operations in relation to and compliance with legal and regulatory requirements included but not limited to workplace safety regulations.

• • • • •

• Termination of employment/contracts of management. • Disciplinary issues between employees and HR and/ or senior management. • Dealing with sensitive or unusual matters of a material nature.

Audit and Risk Committee In accomplishing its assigned responsibilities, the Audit and Risk Committee performs the functions listed hereunder and any such matters as may warrant its attention:

• The effectiveness of the internal controls; • The risk areas of the centre’s operation to be covered in the scope of internal and external audit; • The adequacy, reliability and accuracy of financial information provided by management to other users of such information; • Any accounting and auditing concerns identified as a result of internal and external audits; The committee also performs the following • The centre’s compliance with legal and regulatory specific duties: provisions; and • The activities of the internal audit function, Matters escalated to the committee by the centre head. including its annual work programme, coordination Deciding on salaries, increases and performance with external auditors, the reports of significant bonuses. investigations and the responses of management to Oversees internal relations-related issues. specific recommendations. Supervising matters which have been referred to the CCMA. Interviews and employment of management positions and the centre head.

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The Audit and Risk Committee also performs the following specific duties: Financial accounts The committee reviews the quarterly management accounts and year-end financial statements, and any other published financial information with the centre manager and the external auditor prior to submission or approval by the board:

• On a quarterly basis, the internal audit function provides a report detailing status of audit vs the annual internal audit plan, significant or critical findings noted during the audits performed for the quarter. • Ensure receipt within a specified period, a report from the internal auditor or the outsourced internal audit service provided, detailing the recommendations for improvements.

External audit • Receive the audit plan, the audit report and • Any changes to accounting policy and practice; management letter from the external auditor for • Any areas where the exercise of judgment is required; review and onward submission to the board. • Significant changes to the accounts arising from • Ensure that appropriate action is taken in respect the audit; of any qualifications for the audit report, and any • Compliance with accounting standards or prescribed recommendations made in the management letter. accounting standards; and • Enforce full disclosure. Risk management The Audit and Risk Committee ensures that there Internal audit is a balance between the centre’s approach to risk • Recommend the appointment of an internal auditor management and the nature of the centre’s legal, or an outsourced internal audit service provider operational and financial environment. The Audit and which, while appointed by the board of the centre, Risk Committee assures that: will interact on a regular basis with the centre manager and report to the audit committee. • Take steps to promote and preserve the independence • The risk strategy reflects the views of the board; of the internal auditor or the contracted internal audit • The risk structure is appropriate to support the strategy; firm, and ensure that its work is isolated from internal • There is adequate control over and mitigation of critical risks and that responsibility for risk is assigned and external pressures and influences. through appropriate mechanism; • Review and update, if necessary, and approve the • A rigorous risk identification and assessment process Internal Audit Charter. is in place; and • Ensure that an annual internal audit plan and • A risk register is maintained, graded, ranked, reviewed three-year strategic internal plan is prepared by the and updated from time to time. contracted internal audit firm at the beginning of the financial year, and approve the annual internal audit plan and rolling three-year strategic internal plan subject to any changes that it may agree with the contracted internal audit firm.

BOARD MEETINGS AND ATTENDANCE Three board meetings were held in the review period.

SNII board

Appointment date Board meetings: 3 to the board

HR & Strategic session* Remuneration Committee: 2

Non-executive directors Thando Gwintsa, Chairman

2008

3/3

1/1

Lulama Mxenge, Deputy Chairman

2008

2/3

1/1

Motse Mfuleni

2008

2/3

2/2

1/1

Jean Greyling

2011

3/3

2/2

1/1

Siphiwo Soga (Marion Brauns**)

2011

3/3

1/1

Sipelo Lupondwana, Centre Head

2011

3/3

2/2

1/1

Ishmael Mmbadi, Observer

2011

3/3

0/2

1/1

Kevin Helm, Company Secretary

2011

3/3

Executive and other

* One strategic session was held in the review period and this was attended by the full board. ** Marion Brauns attended board meetings and the strategic session on behalf of Siphiwo Soga.

annual report 2013 | 2014

Innovation distinguishes between a leader and a follower. Steve Jobs

ANNUAL

FINAN

STATE

C MENTSIAL Directors’ Responsibilities and Approval Independent Auditors’ Report Directors’ Report Statement of Financial Position Statement of Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Accounting Policies Notes to the Annual Financial Statements

Directors’ Responsibility and approval The directors are required by the Companies Act of South Africa, to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the company as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with the International Financial Reporting Standard for Small and Mediumsized Entities. The external auditors are engaged to express an independent opinion on the annual financial statements. The annual financial statements are prepared in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the company and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the company and all employees are required to maintain the highest ethical standards in ensuring the company’s business is conducted in a manner

that in all reasonable circumstances is above reproach. The focus of risk management in the company is on identifying, assessing, managing and monitoring all known forms of risk across the company. While operating risk cannot be fully eliminated, the company endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The directors have reviewed the company’s cash flow forecast for the year to 31 March 2015 and, in the light of this review and the current financial position, they are satisfied that the company has or has access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently reviewing and reporting on the company’s annual financial statements. The annual financial statements have been examined by the company’s external auditors and their report is presented on page 55. The annual financial statements set out on pages 56 to 63, which have been prepared on the going concern basis, were approved by the board on 23 May 2014 and were signed on its behalf by:

Thando Gwintsa Chairperson of the Board of Directors

Lulama Mxenge Deputy Chairperson of the Board of Directors Port Elizabeth 23 May 2014

Independent Auditors’ Report

To the members of SEDA Nelson Mandela Bay ICT Incubator NPC We have audited the annual financial statements of SEDA Nelson Mandela Bay ICT Incubator NPC, which comprise the statement of financial position as at 31 March 2014, and the statement of comprehensive income, statement of changes in equity and statement of cash flows 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 56 to 63. Directors’ Responsibility for the Annual Financial Statements The company’s directors are responsible for the preparation and fair presentation of these annual financial statements in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities, and requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of annual financial statements that are free from material misstatements, whether due to fraud or error. Grant Thornton Cape Incorporated Chartered Accountants (S.A.) Registered Auditors

23 May 2014

Auditors’ Responsibility Our responsibility is to express an opinion on these annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual financial statements are free from material misstatement.

125 Cape Road Port Elizabeth 6001

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial statements. The procedures

Per: H. C. Killian Chartered Accountant (S.A.) Registered Auditor

selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the annual 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 annual financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the annual financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the annual financial statements present fairly, in all material respects, the financial position of SEDA Nelson Mandela Bay ICT Incubator NPC as at 31 March 2014, and its financial performance and its cash flows for the year then ended in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities, and the requirements of the Companies Act of South Africa. Other matter Without qualifying our opinion, we draw attention to the fact that supplementary information set out on pages 64 to 65 does not form part of the annual financial statements and is presented as additional information. We have not audited this information and accordingly do not express an opinion thereon.

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Directorsâ&#x20AC;&#x2122; Report

The directors submit their report for the year ended 31 March 2014.

1. Review of activities

4. Directors The directors of the company during the year and to the date of this report are as follows:

Main business and operations The company is engaged in incubation of small businesses in the information technology field and operates principally in South Africa. The operating results and state of affairs of the company are fully set out in the attached annual financial statements and do not in our opinion require any further comment. Net loss of the company was R 642 409 (2013: loss R 778 234), after taxation of R - (2013: R -).

2. Going concern The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

5. Secretary The secretary of the company is The Corporate Administrative Trust Company (Pty) Ltd of: Business address 147A Cape Road Mill Park Port Elizabeth 6001 Postal address P. O. Box 32298 Summerstrand Port Elizabeth 6019

3. Events after the reporting period

6. Auditors

The directors are not aware of any matter or circumstance arising since the end of the financial year.

Grant Thornton Cape Incorporated will continue in office in accordance with section 90 of the Companies Act of South Africa.

Statement of

Financial Position Figures in Rand

Notes

2014

2013

466 422

411 145

Trade and other receivables

1 059 238

921 097

Cash and cash equivalents

Assets Non-Current Assets Property, plant and equipment Current Assets

Total Assets

579 542

1 304 552

1 638 780

2 225 649

2 105 202

2 636 794

1 740 545

2 382 954

364 657

253 840

2 105 202

2 636 794

Equity and Liabilities Equity Retained income Liabilities Current Liabilities Trade and other payables Total Equity and Liabilities

annual report 2013 | 2014

Statement of

Comprehensive Income Figures in Rand Revenue

Notes 6

Other income Operating expenses Operating loss

Investment revenue

Loss for the year

2014 126 031

116 969

3 552 179

3 530 727

(4 351 014)

(4 480 666)

(672 804)

(832 970)

30 395

54 736

(642 409)

(778 234)

Other comprehensive income Total comprehensive loss for the year

2013

(642 409)

(778 234)

Statement of

Changes in Equity Figures in Rand

Retained income

Total equity

3 161 188

Total comprehensive loss for the year

(778 234)

Total changes

(778 234)

Balance at 01 April 2013

2 382 954

Balance at 01 April 2012 Changes in equity

Changes in equity Total comprehensive loss for the year

(642 409)

Total changes

(642 409)

Balance at 31 March 2014

1 740 545

Statement of

Cash Flows Figures in Rand

Notes

2014

2013

(454 541)

217 711

Cash flows from operating activities Cash (used in) generated from operations Interest income Net cash from operating activities

30 395

54 736

(424 146)

272 447

(312 528)

(143 726)

Cash flows from investing activities Purchase of property, plant and equipment

Proceeds from insurance claim

11 664

Net cash from investing activities

(300 864)

(143 726)

Total cash movement for the year

(725 010)

128 721

Cash at the beginning of the year Total cash at end of the year

1 304 552

1 175 831

579 542

1 304 552

Accounting Policies 1. Presentation of Annual Financial Statements

1.1. Property, plant and equipment Property, plant and equipment are tangible items that: â&#x20AC;˘ are held for use in the production or supply of goods or services, for rental to others or for administrative purposes; and â&#x20AC;˘ are expected to be used during more than one period.

The annual financial statements have been prepared in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities, and the Companies Act of South Africa. The Costs include costs incurred initially to acquire or annual financial statements have been prepared on construct an item of property, plant and equipment the historical cost basis, and incorporate the principal and costs incurred subsequently to add to, replace accounting policies set out below. They are presented part of, or service it. If a replacement cost is recognised in South African Rands. in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced These accounting policies are consistent with the part is derecognised. previous period.

annual report 2013 | 2014

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. Depreciation is provided using the straight-line method to write down the cost, less estimated residual value over the useful life of the property, plant and equipment, which is as follows: Item Average useful life Leasehold property Period of lease Furniture and fixtures 10 years Office equipment 10 years IT equipment 2 years The residual value, depreciation method and the useful life of each asset are reviewed at each annual reporting period if there are indicators present that there is a change from the previous estimate. 1.2. Financial instruments Financial instruments at amortised cost Financial instruments may be designated to be measured at amortised cost less any impairment using the effective interest method. These include trade and other receivables, loans and trade and other payables. At the end of each reporting period date, the carrying amounts of assets held in this category are reviewed to determine whether there is any objective evidence of impairment If so, an impairment loss is recognised. 1.3. Leases A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Operating leases - lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted. 1.4. Government grants Government grants are recognised when there is reasonable assurance that: â&#x20AC;˘ the company will comply with the conditions attaching to them; and â&#x20AC;˘ the grants will be received. Government grants are recognised as income over the periods necessary to match them with the related costs that they are intended to compensate. A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs is recognised as income of the period in which it becomes receivable. Grants related to income are presented as a credit in the income statement (separately). 1.5. Revenue Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax. Interest is recognised, in profit or loss, using the effective interest rate method.

Notes to the

Annual Financial Statements Figures in Rand

2013

2012

2. Property, plant and equipment 2013 Cost

2012

Accumulated depreciation

Carrying value

Cost

Accumulated Carrying value depreciation

Furniture and fixtures

159 878

(46 106)

113 772

202 936

(50 129)

152 807

IT equipment

247 000

(220 142)

26 858

238 171

(182 167)

56 004

Leasehold improvements

297 004

(2 599)

294 405

441 833

(293 578)

148 255

Office equipment

103 553

(72 166)

31 387

103 553

(49 474)

54 079

Total

807 435

(341 013)

466 422

986 493

(575 348)

411 145

152 807

(19 491)

(19 544)

113 772

56 004

15 524

(44 670)

26 858

148 255

297 004

(150 854)

294 405

54 079

(22 692)

31 387

411 145

312 528

(19 491)

(237 760)

466 422

115 840

56 614

(19 647)

152 807

39 973

57 492

(41 461)

56 004

305 925

(157 670)

148 255

Reconciliation of property, plant and equipment - 2014 Furniture and fixtures IT equipment Leasehold improvements Office equipment

Reconciliation of property, plant and equipment - 2013 Furniture and fixtures IT equipment Leasehold improvements Office equipment

42 024

29 620

(17 565)

54 079

503 762

143 726

(236 343)

411 145

210 772

47 027

3. Trade and other receivables Deposits Prepayments Trade receivables VAT

105 685

822 577

762 127

25 889

6 258

1 059 238

921 097

annual report 2013 | 2014

Notes to the

Annual Financial Statements Figures in Rand

2013

2012

579 505

Fair value of trade and other receivables The carrying amount of trade and other receivables approximates its fair value. 4. Cash and cash equivalents Cash and cash equivalents consist of: Bank balances Cash on hand

579 542

Accruals

4 898

2 169

Deposits received

1 592

326 377

216 295

5. Trade and other payables

Bonus and leave provision Trade payables

31 790

35 376

364 657

253 840

126 031

116 969

Contractual amounts

439 227

459 855

Loss on assets left at old premises

(19 490)

Fair value of trade and other receivables The carrying amount of loans to and from group companies approximates its fair value. 6. Revenue Rental income 7. Operating loss Operating loss for the year is stated after accounting for the following: Operating lease charges Lease rentals

Proceeds from insurance claim Depreciation on property, plant and equipment Employee costs

11 664

20 988

238 564

236 341

2 207 807

1 747 188

Notes to the

Annual Financial Statements Figures in Rand

2013

2012

30 395

54 736

37 000

36 000

8. Investment revenue Interest revenue Bank 9. Auditorsâ&#x20AC;&#x2122; remuneration Fees Accounting and tax services

8 775

10 000

45 775

46 000

(642 409)

(778 234)

Depreciation and amortisation

238 564

236 341

Net loss on disposed off assets

7 826

(30 395)

(54 736)

(803)

(138 141)

706 548

10. Cash (used in) generated from operations Loss before taxation Adjustments for:

Interest received Non-cash item Changes in working capital: Trade and other receivables Trade and other payables

110 817

107 792

(454 541)

217 711

11. Commitments Operating leases â&#x20AC;&#x201C; as lessee (expense) Minimum lease payments due - within one year - in second to fifth year inclusive

679 430

327 431

3 739 311

289 000

4 418 741

616 431

Operating lease payments represent rentals payable by the company for leasing of its office property and office equipment. The lease is negotiated for an average term of five years and rentals are fixed and are escalated at 7% p.a. for property. Office equipment rental terms are five years, monthly payments are fixed with no escalation. No contingent rent is payable.

annual report 2013 | 2014

Detailed Statement of

Comprehensive Income Figures in Rand

Notes

2014

2013

126 031

116 969

Revenue Rental income Other income Recoveries Interest received

Proceeds from insurance claim Government grants Expenses Loss for the year

3 122

9 739

30 395

54 736

11 664

20 988

3 537 393

3 585 463

3 582 574

3 585 463

(4 351 014)

(4 480 666)

(642 409)

(778 234)

Operating expenses Advertising

(62 047)

(88 184)

(45 775)

(46 000)

Bad debts

(23 876)

(44 322)

Bank charges

(11 520)

(8 986)

Board members expense

(72 636)

(69 412)

Cleaning

(52 950)

(1 605)

Auditorsâ&#x20AC;&#x2122; remuneration

Computer expenses Consulting fees Consumables

(115 030)

(117 165)

(28 083)

(110 664)

(28 374)

(68 626)

(238 564)

(236 341)

Employee costs

(2 207 807)

(1 747 188)

Entertainment

(14 452)

(35 939)

Depreciation, amortisation and impairments

Fines and penalties Insurance Lease rentals on operating lease Legal expenses

(2 500)

(22 521)

(24 062)

(439 227)

(459 855)

(329)

Detailed Statement of

Comprehensive Income Figures in Rand Levies Loss on disposal of assets Mentoring and business development

Notes

2014

2013

(250)

(19 490)

(138 895)

(411 466)

Moving costs

(34 562)

Postage

(78 537)

(34 192)

Printing and stationery

(74 024)

(107 538)

Repairs and maintenance

(5 616)

(11 796)

Security

(6 848)

(7 147)

Special projects and contracted running costs Subscriptions Telephone and fax Training Travel - local Travel - overseas Utilities

(27 504)

(13 524)

(11 425)

(160 121)

(171 498)

(27 986)

(61 426)

(351 354)

(288 012)

(9 466)

(207 503)

(67 150)

(80 310)

(4 351 014)

(4 480 666)

Our address details are: Land Bank Building, First floor 51 Newton Street Newton Park Port Elizabeth Contact Us: Tel: 041 409 8600 , Fax: 041 484 3726 Email: info@snii.co.za www.snii.co.za

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