Financial Report

Mariaan de Jager Finance Executive

OVERVIEW OF OPERATIONS

During the period under review the Federation continued to review its operations in-line with its revenue generating capability. The financial year commenced with the Section 189 process of the Labour Relations Act having been firmly bedded down. Cost savings initiatives presented to the Board during the approval of the budget for the year under review have been fully implemented and are slowly beginning to bear fruit. The Board together with the Executive undertook a strategic review of the Federation’s strategic goals and objectives. This led to a revised strategic plan being formulated that seeks to steer the Federation in a direction where it better meets the needs of its members by taking on a greater lobby and advocacy role. Emphasis has also focused on building a SEIFSA team that is geared to meeting the interests of its affiliated membership.

The poor state of the economy continued to challenge the Federation in meeting its budgetary targets. A bleak economic growth outlook together with the recovery from the COVID-19 pandemic have seen many member companies operating in survival mode, although a handful of members reported relatively decent profits, albeit coming-off a low base. Unemployment grew (averaging around - 35%) to the highest levels ever recorded in the history of our country. The much-awaited government infrastructure spend is yet to materialize. The delay in the infrastructure spend presents a material constraint on the growth performance of the metals and engineering sector.

The lack of large-scale capital investment, the riots that ravaged KwaZulu Natal and Gauteng together with the floods that caused devastation in KwaZulu Natal have caused immense damage to an already struggling economy. To date, the country has not recovered from this devastation. To ease the pressure on wage costs, a watershed agreement was reached in July 2021. This saw increases being granted on minimum wage rates as per the wage tables on a sliding scale of between 5% to 6% calculated on the minimum rates.

Industrial Relations and Legal Services

The closedown of manufacturing facilities in China due to the resurgence of the COVID-19 virus severely impacted the supply of raw materials to the world. The war in Ukraine further exacerbated the supply of food, energy and raw materials to many markets. This has had a negative impact on the cost of inputs into various supply chains to the membership. The Federation has been hard hit by limited spending by its members, meaning that the uptake of the Federation’s products and services have suffered. For the first time in many years the collection of membership fees has proved to be extremely challenging.

For the year under review the Federation continued to operate with a primary focus on collective bargaining, lobbying and advocacy, whilst simultaneously having a secondary focus on generating revenue from consultancy, training and the sale of publications such as the SEIFSA Price and Index Pages, Industrial Relations Advisors and The Main Agreement Handbook. The primary source of revenue was generated from fees levied to Associations, with the other revenue streams being generated from the sale of products, services and publications offered by the following Divisions:

Economic and Commercial

Human Capital and Skills Development The Safety, Health, Environment and Quality service offerings have been outsourced.

SEIFSA has continued to offer accounting, administration and management services to its affiliated Associations.

The SEIFSA Training Centre (STC) continues to focus on developing high calibre artisans to meet the needs of employers in addressing the skills shortage in artisan development that faces the country. The STC underwent a major transformation during the year, with a significant portion of the cost being borne by the landlord. The STC is now in a position to elevate the performance of the Centre to the next level. In spite of the disruptions caused by the construction, the management of the STC were able to produce satisfactory results although not quite in-line with the forecast. With the relaunch of the STC, we anticipate a marked improvement in student numbers and a greater optimisation of our customer base. Working closely with our service provider, Thuthukisa Advisory & Consulting, we are forecasting better financial returns during the next financial year. The relaunched STC is now best placed to become an important catalyst in contributing to the upskilling of our population, uplifting communities and creating opportunities for young entrepreneurs.

During the year the Federation invested in creating awareness and publicity together with revamping of its digital platforms. This strategy has boded well for the Federation with publicity reaching high levels as measured by the Advertising Value Equivalent (AVE). Although there has been a relatively high turnover of staff both at a junior and senior levels, the Federation has been agile in filling these vacancies, without much disruption and ensuring that the Federation meets its objectives and budget.

Overview of Financial Results

We are pleased to report that the Federation recorded a surplus against budget for the year under review after sustaining heavy deficits over the past two years. This is testament to the Federation’s ability to be agile, to cope in a fastchanging environment and remain resilient in the aftermath of the devastation caused by the pandemic.

Regrettably income generated from membership fees has decreased by 12.6% from FY2020/21. This decrease was mainly due to the poor economic environment and trading conditions that caused many a business closure and a reduction in headcount recorded across our membership base. The SEIFSA Training Centre (STC) has been under new management from 1 January 2021. Thuthukisa Advisory & Consulting (TAC) has taken over the management of the STC for the next five years. It is pleasing to note that the STC under TAC has recorded a profit in its 18 months of operation.

The revenue generated from the sale of products and services decreased by 1.6% when compared to FY2021/22. This deterioration is a function of the tough operating environment.

Total expenses for the current year decreased by 13.9% when compared to FY2020/21. Cost containment and the optimisation of costs continued to be implemented throughout the year and will remain the mantra into the next financial year.

13.9%

Decrease in total expenses

The year closed with a surplus which is a significant improvement from the previous two financial years.

Internal Control

SEIFSA’s system of internal control is designed to provide reasonable assurance that, inter alia, assets are safeguarded and that liabilities and working capital are managed efficiently.

Risk strategy

SEIFSA has a risk management strategy in place and actively monitors and takes appropriate action against the risks identified and captured in the Risk Register.

Fraud and corruption

SEIFSA has committed itself to actively combatting fraud and all other acts of dishonesty on a zerotolerance basis.

Discontinued Activities/ Activities to te Discontinued

SEIFSA has no discontinued activities or activities to be discontinued in the next 12 months.

New or Proposed Activities

SEIFSA has no new or proposed activities for the next 12 months.

Gifts and Donations received In kind from Non-Related Parties

No gifts and donations were received in kind from non-related parties. Employees are limited to receiving gifts totalling R500.00 per annum and are obliged to complete the Gift Register which is tabled at the Executive Committee meeting every quarter.

Events After Reporting Date

No events took place after the reporting date that would materially impact on the financial position and/or performance of SEIFSA

Future Plans

SEIFSA will continue to focus on its revised and approved strategy and continue to focus on its primary mandate which is: collective bargaining, lobbying and advocacy. As a secondary focus the Federation will simultaneously seek to generate revenue from the rendering of services that are paramount to its members’ and deliver products that add value. Continuous monitoring of the environment affecting the Federation will be maintained and the necessary corrective action will be implemented timeously in order to ensure that the Federation remains financially viable, relevant and on track to deliver on its mandate.

The year ahead remains a challenging one, with a bleak economic forecast, the war in Ukraine, high levels of unemployment, global supply issues and limited capital investment. This notwithstanding and with the continued support of a loyal membership, supportive Board and hard-working Executive and Staff the Federation remains firmly of the view that the wins achieved in FY2021/22 can be repeated in FY2022/23.

Mariaan De Jager Finance Executive