Coega Annual Report Annual Report 2007.pdf · 2009-10-09 · Proﬁles – Audit & Finance Sub-committee 29 Board of Directors and Sub-committees 30 Statement of Responsibility of

COEGA INDUSTRIAL DEVELOPMENT ZONE AND DEEPWATER PORT

A N N U A L R E P O R T 2 0 0 7

“The infrastructure built around the Coega projectwas a fundamental aspect to us making the decision to go ahead.

It’s one of the best infrastructures I have seen throughout the world.”

Cynthia Carrol, former Alcan Primary Metal Group Presidentand now CEO of Anglo-American

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VISIONTo be the preferred investment destination

MISSIONTo provide a competitive investment location and a total business solution for customers and ensure sustainable economic development

The Coega Industrial Development Zone (IDZ) initiative, located within Nelson Mandela Bay (Port Elizabeth), is South Africa’s premier location for new industrial investments. This multi-billion rand industrial development complex covers 11 000 hectares and includes a new deepwater port.

right PLACE • right TIME • right CHOICE

INDUSTRIAL DEVELOPMENT ZONEAND DEEPWATER PORT

2 C O E G A A N N U A L R E P O R T • 2 0 0 7

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The Coega Development Corporation (CDC), which is the developer and operator of the Coega

Industrial Development Zone (IDZ), is responsible for the entire landside infrastructure, while

a modern deepwater port facility is being developed by the Transnet National Ports Authority

(TNPA). This initiative, commonly known as the Coega Project, aims to position South Africa

as a platform for global exports by attracting foreign and local investment, principally in

manufacturing industries.

The CDC is committed to operating an efficient, world-class IDZ for the benefit of all investors.

In line with this objective, the CDC has prepared a strategic Development Framework Plan for the

Coega IDZ, from which specific infrastructural development requirements for the 6 500ha Core

Development Area (CDA) have been provided.

THE COEGA DEVELOPMENTCORPORATION (PTY) LTD


Dynamic Commodities facility in Zone 3 of the Coega IDZ

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ZONES LEGEND

Zone 1 North: Commercial District

Zone 1 South: Port Cluster/Light Industry

Zone 2: Auto Cluster

Zone 3: Light Industries Cluster

Zone 4: Training/Academic Cluster

Zone 5: Base Metallurgical Cluster

Zone 6: Metallurgical Cluster

Zone 7: Chemical Cluster

Zone 8: Port Area (Developed by TNPA)

Zone 9: Valley Cluster

Zone 10: Mari-Culture Cluster

Zone 11: Light and Medium Manufacturing Cluster

Zone 12: General Cluster

Zone 13: Valley Metal Cluster

Zone 14: Airport and Logistics Cluster

right PLACE • right TIME • right CHOICE

The Coega Industrial Development Zone (IDZ), designed to meet the needs of manufacturers, trading and logistics companies wanting to succeed in global markets, is sub-divided into a number of clusters based on international research and the existing industrial strengths of the region.

The Eastern Cape Province, in which the Coega IDZ is situated, is fast developing into one of Africa’s prime investment destinations. As part of the Nelson Mandela Bay metropolitan area, comprising the city Port Elizabeth and the towns of Uitenhage and Despatch, the 11 000 hectare Coega IDZ has signed contracts with a wide range of investors. It is attracting growing interest from investors from all parts of the globe, which has influenced the Coega Development Corporation (CDC) to bring forward plans for the second phase of the project by five years.

“… our relationship is both practical and mutually beneficial as demonstrated among others by the fact that Straits Chemicals of Singapore has committed an estimated US$5 billion for investment at Coega, one of our Industrial Development Zones.” President Thabo Mbeki at the State banquet in honour of President Sellapan Ramanathan of Singapore, 19 April 2007.

“The western side of the province has had an overwhelming injection of investments, e.g. VW Paintshop, Alcan, Seark, Logistics Park and Coega IDZ. This is most appreciated.” Nosimo Balindela, Premier of the Eastern Cape, in her State of the Province Address 2007.

“Coega has served as a major catalyst in skills development initiatives in Nelson Mandela Bay, with 561 learnerships currently being implemented in the mechanical, electrical engineering and construction sectors. Coega is set to implement 3 200 learnerships in the next two years to support the region’s artisan skills requirements, as well as training of 5 000 semi-skilled workers to address the skills requirements of the construction sector.” Ms Nondumiso Maphazi, Executive Mayor Nelson Mandela Bay Municipality, during the State of Nelson Mandela Bay Address on 2 March 2007

COEGA… the preferred destination in South Africa


CONTENTS

7

Milestones: 1970 - 2007 8

Chairman’s Statement 10

Chief Executive Officer’s Report 13

CDC Services 17

Infrastructure Development 18

Human Capital Development 20

Investment Promotion 23

Corporate Governance Statement 26

Profiles – CDC Board of Directors 27

Profiles – Audit & Finance Sub-committee 29

Board of Directors and Sub-committees 30

Statement of Responsibility of the Board of Directors 31

Attendance Schedule of Board and Sub-committee meetings 32

Profiles – CDC Executive Managers 33

Risk Management and Internal Controls 35

Certificate by Company Secretary 36

Report of the Audit and Finance Sub-commitee 37

Financial Statements 38

Independent Auditor’s Report 39

Glossary 59

1970 – A port was first mooted on the Coega River on South Africa’s coast. It was not pursued due to a number of factors, including the growing isolation of South Africa from the rest of the world.

1996 – A pre-feasibility study into the project was commissioned by private sector interests through a not-for-profit company.

The Industrial Development Zone would consist of a deep-water port and an industrial area.

The pre-feasibility study was positive and national, provincial and local Government determined that a full feasibility study should be undertaken.

1997 – The study established that the Coega Project was viable – and well-suited to the establishment of the deepwater port.

National government agreed to lead the Coega Project initiative and established the Coega Implementing Authority, drawing together national, provincial and local government structures.

1998 – A strategic review was undertaken which determined that, in order to attract investors, the project developers should provide infrastructure within the IDZ and port.

1998, August – A new corporate structure was registered, with the South African Government as shareholder.

1999, November – The Coega Development Corporation (CDC) takes over Implementing Authority role.

2000, November – Recommendation is made to appoint P&O Nedlloyd/TCI infrastructure as a preferred private partner.

Transportation parastatal Transnet confirmed that Portnet would develop the common infrastructure for the port, and that P&O Nedlloyd would negotiate to develop and operate a container terminal.

2000, December – IDZ Legislation promulgated.

2001, February – President Thabo Mbeki indicates that the Coega IDZ will be the first to be gazetted in South Africa.

2001, March – Coega IDZ announces that the infrastructure design has been completed.

The Minister of Trade and Industry declares his intention to proclaim the Coega Industrial Development Zone.

2001, May – The Department of Minerals and Energy issues a permit for the mining of the Coega Kop Quarry.

2001, June – The Coega Community is relocated to Wells Estate.

MILESTONES 1970 – 20072001, December – Records of Decision issued for the rezoning of land for the IDZ from agricultural to special purpose usage.

Declaration of the Coega IDZ by the Cabinet. Coega becomes the first declared South African IDZ.

2002, February – Coega IDZ Provisional Operator’s Permit awarded to the CDC.

Port construction tender published.

2002, March – IDZ Construction Tender published. 2002, April – CDC Business Registration process commences.

2002, May – Gateway to the African Renaissancecampaign launched.

2002, June – CDC Job seekers registration process launched.

2002, July – IDZ construction process starts.

CDC Board approves Procurement Policy & Procedures.

2002, August – Port tender awarded US $250-million.

2002, September – Port construction starts.

Occupational Health and Safety practices incorporated into CDC operating process.

Environmental Policy adopted.

2002, October – Zone Labour Agreement signed by employer and labour stakeholders in construction industry.

2002, November – 15 construction sites are operational.

2002, December – Joorst Park construction village renovations completed. Village to house Coega Project workers.

2003, January – Multi-use recruitment and trainingfacility completed.

Temporary power supply to Ngqura Port area completed.

2003, April – Start of upgrading of section of National Road that runs through the IDZ.

Development Management Plan of open space for entire Coega Project area completed. Construction Village ready for occupation.

Access roads to the Metallurgical Cluster completed.

2003, May – Construction village business centre completed.


2003, June – Temporary power supply to MetallurgicalCluster installed.

2003, July – Alcan announces take-over bid for Pechiney, resulting in the delay of the Coega Aluminium Smelter project.

Phase 1 of services to Metallurgical Cluster completed.

2003, August – ESS Coega takes over the management of the Construction Village.

2004, April – Construction of Neptune Road Systems Interchange – linking road, rail, sea, IDZ and port – continues.

2004, 30 June – Flooding of the basin of the deepwaterPort of Ngqura.

Construction of the port continues.

2004, September – International benchmarking study for Coega IDZ competitiveness by global consulting group completed.

2005 – Installation of services in the Light Industrial cluster of the IDZ commenced. Services include roads, water and sewerage. Provision of similar services for Automotive Cluster commences. Bridge over the N2, linking Light Industrial Cluster and Automotive Cluster commences.

2005, March – Tender for the construction of the Coega office block published.

2005, May – Coega announce arrival of its first investor inthe Coega IDZ.

Haul road alongside the Neptune Road decommissioned.

2005, October – Announcement of Straits Chemicals investment.

Announcement of Stainless Steel Precision Strip Facility.A consortium comprised of Boecker & Wender Stahl (BWS) of Germany, Industrial Development Corporation (IDC) & Colombus Stainless (SA).

2005, November – Switching on of lights at Coega IDZ.

2005, December – Bridge over the N2, linking LightIndustrial and Automotive Clusters completed.

Neptune Interchange completed and opened.

2005, December – Expansion of Hougham Park interchange, along the National Road (N2), commenced.

2005, December – First fast-tracked development in the IDZ completed within five months and handed over.

MILESTONES 1970 – 20072006, January – Tender for the construction of the Coegaoffice block awarded.

1st Phase Electrification to Zones 1, 2 & 3 and Port Clustercompleted.

2006, January – Headwalls of Eastern and Westernbreakwaters completed at the Ngqura harbour.

2006, March – World Bank presents CDC with an award in recognition of excellent service (speed, quality, accuracy and relevance) to investors.

May, 2006 – Cerebos signs an agreement, which will see the operation relocate to the IDZ

2006, September – World Bank’s Multilateral Investment Guarantee Agency names CDC as one of the top five Investment Promotion Agencies in the world.

2006, October – Dynamic Commodities signs as an investor in the IDZ

2006, November – Coega signs Alcan to build an aluminium smelter in Zone 5 of the IDZ

2006, November – Alcan Inc signs energy deal with Eskom; land deal with Coega Development Corporation and equity deal with the IDC.

2006, December – Coega signs agreements with the Manufacturing and Energy SETA’s for training of young people in scarce skills.

2007, January – Eastern Cape Biomass Fuel Pellets (Pty) Ltd signs with Coega.

2007, February – Coega Learner announced as the Best EPWP supervisor in the country.

2007, March – Dynamic Commodities becomes the first investor to operate from the IDZ.

2007, March – Coega announces the building of a 1 500-seat Call Centre and BPO Park.

2007, March – Coega nominated as one of South Africa’s Top Performing Companies by South Africa’s Top National Companies, which incorporates the Top 300.

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Minister of Public Enterprise, Alec Erwin, on a visit to the Alcan site (Zone 5)during the signing of the Coega aluminium smelter agreement on November 24, 2006.

Artist’s impression of the Coega Aluminium Smelter

CHAIRMAN’S STATEMENT


Under construction, the new multi-tenant CDC Head Office in the Coega IDZ, scheduled to be completed by the end of 2007.

(Front: left to right) Pepi Silinga (CEO, CDC) and Michel Jacques (Senior Vice President, Alcan Inc. and

incoming President and CEO Alcan Primary Metals) sign the historic Coega Aluminium Smelter agreement in the

presence of CDC executive management.

T he Coega Project has experienced a phenomenal year in many respects, particularly on two key indicators,

namely Investment Promotion and Job creation. Entrenched firmly in its vision “To be the preferred investment destination”, Coega has, against the odds, surpassed all expectations in Financial Year 2006/07 by signing nine investors, with an investment value of over R20 billion – creating more than 3 300 jobs.

Strategic importance of Coega Project

The IDZ programme in South Africa was established to attract Foreign Direct Investment (FDI) through the export of beneficiated, manufactured products which, in turn, would promote the competitiveness of South African enterprises as well as regional development.

The Coega Project, having been identified as a lead project in South Africa, has received government funding of over R8 billion, including R3,1 billion for the new port, R2 billion for infrastructure in the IDZ, and R2,1 billion by the State electricity company, Eskom, to upgrade the power supply. State rail company, Transnet, has invested R500 million in upgrading rail facilities.

The Coega Project has been approached by the Nelson Mandela Bay Municipality, to play an active role in the Nelson Mandela Bay Logistics Park in Uitenhage. We view this as an important milestone in our co-operative relationship with the Metro. It demonstrates real complementary synergies between the Coega Project and the surrounding metropolis.

Impact of AsgiSA

There are also synergies between the mandate of the Coega Project and the intent of the Accelerated and Shared Growth Initiative of South Africa (AsgiSA) and the Joint Initiative on Priority Skills Acquisition (JIPSA). The mandate of the Coega Project is to develop and operate the Industrial Development Zone of more than 11 000 hectares. AsgiSA’s purpose, on the other hand, is to accelerate the rate of economic growth, substantially

increase the rate of employment, and broaden the impact of economic development.

The contribution of the Coega Project towards AsgiSA and JIPSA will primarily be through: the creation of job opportunities, focused development of Small and Medium Enterprises (SMEs), and skills development through the Coega Human Capital Solutions (CHCS) division. The core capabilities of CHCS are in the provision of priority skills in the construction and services industries, particularly Business Process Outsourcing and Off-shoring (BPO&O).

AsgiSA identifies a number of constraints, such as:

The cost and efficiency of the national logistics system and some infrastructure;

The shortage of suitably skilled labour and disjointed spatial settlement patterns;

The regulatory environment and the burdens on small and medium enterprises; and

Deficiencies in state organisations, capacity and strategic leadership.

The Coega Project is directly impacted by these constraints and will contribute towards finding workable solutions, together with relevant organs of state and private business. Indeed, the Coega Project and the new Port of Ngqurha will be a major contributor to South Africa’s economic infrastructure, thus contributing to the reduction of some of the bottlenecks identified by AsgiSA.

Business Drivers

The Coega Project is undoubtedly reaping the benefits of its strategy, to build an enabling infrastructure, as a key requirement for attracting the right kind of investors. Cynthia Carrol, former Alcan Primary Metal Group President and now CEO of Anglo-American, confirmed the correctness of this bold strategy when she stated, “The infrastructure built around the Coega project was a fundamental aspect to us making the decision to go ahead. It’s one of the best infrastructures I have seen throughout the world.”

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Sealing their agreement during the signing of the Service Level Agreement with ESETA are (left to

right:) Dr Raymond Patel (CEO, MERSETA), Pepi Silinga (CEO, CDC) and Bafana Ngwenya

(CEO, ESETA).


Above: Adding flavour to the signing of the Cerebos agreement are (left to right) Themba Koza (Executive Manager: SHEQ, CDC), Mike Kwenaite (Portfolio Councillor: EDTA, NMBM), Palesa Sedibe-Ncholo (Khumo Bathong Strategic Investments – BEE-partner Cerebos) and Len Chandler (MD, Cerebos).

Right: A German delegation, representing various sectors, during a fact-finding tour of the Coega IDZ.

Shift towards Zone Operations and Financial Sustainability

Due to the impressive achievements attained in Investment Promotion, the focus is now shifting towards effective operations of the Industrial Development Zone (IDZ). There are at least three investors currently operating in the IDZ, with more scheduled to come on board during the course of the year.

Corporate Governance

Adherence to corporate governance principles and practices is central to the manner in which the Coega Development Corporation (CDC) conducts its business. The CDC has, in the last financial year, continued its practical commitment to corporate governance practices by continually ensuring adherence to best practices.

As the business continues to grow, the CDC will intensify its training among its staff as it believes that its achievements are directly related to the strict observation of good corporate governance practices.

Ethics

The values of the CDC emphasise the importance that our behaviour corresponds to the highest standards of corporate ethics, as displayed by our corporate culture.Our values are reflected in our policies, which foster good corporate governance across all operations.

Outlook

There is no doubt that the CDC’s strategy in Investment Promotion, Infrastructure Development and overall

organisational management is sound, as clearly demon-strated by the achievements of the past financial year.

The CDC has once again set itself bold and ambitious targets for the upcoming financial year. The CDC is not oblivious to the challenges it faces, which incorporate the following: Funding, Customs Integration, Power Security, Rail Roll-out and Port Facility Readiness.

We look to the future with optimism, confident in our campaign to continue developing innovative solutions for our investors, investing in our staff and contributing towards the development of an enabling framework for continued growth and sustainability of the IDZ.

Acknowledgements

I would like to thank and extend a word of gratitude to the Chief Executive Officer and his Executive Management team, for their sterling effort and contribution. You have proven once again that you have the will, capacity and tenacity to rise to the challenges presented by the Coega Project.

An extended word of gratitude goes to all the staff of this wonderful organisation for their contribution. There is no doubt in the eyes of the Board that this success is through the quality of the people that the CDC attracts and retains. The CDC remains committed to engaging with our stakeholders, namely investors, shareholders and communities.

On behalf of the Board, I would like to extend my sincere thanks to Mr Mandisi Mpahlwa for his leadership and dedication as Minister of Trade and Industry, Premier Nosimo Balindlela and the Provincial Cabinet of the Eastern Cape Provincial Government, as well as Executive Mayor of the Nelson Mandela Bay Municipality, Ms Nondumiso Maphazi.

Moses M NgoashengChairperson

CHIEF EXECUTIVEOFFICER’S REPORT

T he Coega Development Corporation (CDC) has once again achieved excellent results. Right from

the outset, the organisation challenged itself to pursue above average targets in all its objectives, particularly Investment Promotion and Job Creation.

In the first place, against a target of 2 960 jobs, the CDC created 3 371 jobs. Secondly, the CDC secured nine investors against an ambitious target of 10. The value of these investments is over R20,4 billion, with Alcan making up R20 billion of this value. What is also pleasing is that the investments are spread across a number of targeted sectors.

We are very proud of these achievements, as they are a testimony to what our country can achieve with a clear vision from government, financial commitments and the will and collaborative partnerships with the private sector.

Performance Overview

The CDC has every reason to be proud of its performance over the last financial year across all critical areas.

Infrastructure and Facilities Development

The CDC’s infrastructure programmes are divided into four main streams, namely:

Programme 1: Enabling / Municipal Infrastructure (Zone Infills) Programme 2: Commercial / Investor-driven

Infrastructure Programme 3: General / Zone Development Programme 4: Professional Services

To date, the Coega Project has completed 37 Enabling Infrastructure Projects in the Core Development Area (CDA) of the IDZ, with a spend of more than R1,5 billion, including six top structure developments.

Investment Programme Progress on investment promotion is summarised in the following table:

Funding

The entire Coega Project can be regarded as a capital investment. In financial terms, the project has three main phases:

1. Planning – substantially completed in 2002, but ongoing for new opportunities, e.g. Chemicals cluster;

2. Infrastructure development – commenced 2002;3. Marketing to investors – commenced 2004.

The second phase is now in full swing and, funding permitting, will peak in the 2007/08 year then gradually reduce until about 2010, when the majority of the infrastructure for the Core Development Area will be in place. There will be a further upswing in infrastructure spending when the land east of the Coega River is developed in the next financial year. The third phase – marketing – is now intense and will remain so into the foreseeable future.

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Thulani Gcabashe (CEO Eskom) and Michel Jacques (Sr Vice President, Alcan Inc. and

incoming President and CEO Alcan Primary Metals) celebrate the signing of the Coega

Alcan aluminium smelter deal.

Investor

a) Dynamic Commodities

b) Biomass

c) Cerebos

d) Alcan

e) MSC

f) SATI

g) General Upholsterers / Acoustix

h) Bosun Bricks

i) PE Cold Storage

Sector

Fruit Processing for Export

Biomass Fuel

Salt Production

Aluminium Smelter

Container Depot

Container Depot

Manufacturer of vehicle interior trim for export and domestic market

Manufacturer and distributor of pre-cast concrete products, particularly paving

Cold Storage/Export Facilities

Status

In operation, with 700 people employed.

Construction complete.

Construction of factory commenced in June 2007.

Planning in progress.


Construction underway




Strategic Analysis:Global Economic Environment Outlook

Globally, there is fierce competition for Foreign Direct Investment (FDI), and the CDC has found itself competing with a number of countries and institutions, who are all trying to attract limited capital investments.

The influence of a new emerging world economic order cannot be ignored. The USA still remains the world’s largest source of FDI, but the world’s 10 largest economies accounted for just over 72% of global GDP in 2004. Collectively, emerging markets hold more than US$3 trillion in reserves, and their savings and investment performance outshine the developed world. The sustained rapid growth of the Chinese economy over the past decade, with average GDP growth of close to 10% p.a., saw its share in the global economy more than double since 1990. By 2005 the Chinese economy (in real terms) was 4.2 times larger than in 1990. China owns one-quarter of the US debt, thus affording it a strong voice in US interest rates.

Emerging economies are growing at a substantially faster pace than the world’s richest economies, and hence a rapid change in the balance of the world economy can be expected.

By 2040, it is projected that the Chinese economy will have overtaken the US as the world’s largest economy, although only by a slight margin. An increasing number of current emerging economies will then rank among the world’s 10 largest economies, e.g. Mexico, Russia, India and Brazil. It is estimated, that by 2040, the five emerging economies will have a combined GDP that will exceed that of the G-7 economies.

Growth in developing countries, especially in emerging Asia, is expected to continue at a very rapid rate, well in excess of GDP growth in advanced economies. Africa is reaping the benefits of economic restructuring, strong global commodity demand as well as substantial inflows of FDI (mostly resource-oriented).

Prospects for Africa are also promising. GDP growth increased from 2.5% in 1994 to 5.4% by 2005. A substantial inflow of FDI into the continent, with FDI inflows increasing from about US$2.4 billion in 1990 to just over US$18 billion by 2004, mainly into exploration and production facilities of commodities such as oil and other mineral resources.

Investment Promotion efforts by the CDC need to take cognisance of this changing economic landscape. Prospects for FDI into South Africa, in the Resources Sector, are likely to decline in importance. The Services Sector, on the other hand, is likely to drive growth in overall FDI inflows to the country, particularly in the following areas: ICT, BPO&O, Telecommunications, Transportation and Tourism. Prospects for the manufacturing sector, particularly electronics, automobiles, and machinery are expected to perform positively.

It is also worth noting that South Africa is not only a destination for FDI; it is also likely to be among the top 15 main sources of FDI.

Strategic Focus

As the environment within which the CDC is operating is dynamic and changing rapidly, it has become increasingly critical for the CDC to continuously evaluate its internal capacity to be able to meet the challenges presented by the external environment.

Structured Primary (Core) Focus Areas

Firstly, the initial focus for the CDC was on rolling out an enabling infrastructure. Secondly, aggressive investment promotion and marketing drives were launched in order to present the CDC’s compelling value proposition to the investment community. Having signed a total of nine investors in one financial year, the shift now is on servicing these investors.

The Coega Project aims to expand the base of investment sourcing, particularly from China and India, while targeting niche players in Europe. The CDC will compete on the basis of high “social” capital, i.e. environment and safety, while focusing on energy efficient technologies (hybrid vehicles, etc). Expansion and diversification by US companies also presents real opportunities for the Coega IDZ. Options on use of energy-efficient sources of power will be explored, including solar power and use of fuel cells as used in the technology parks of Aragona in Spain.

In response to the social and economic needs of the environment, within which the Coega Project exists, the


Top: Pictured at the signing of the Biomass agreement are (left to

right) CDC’s Nonkululeko Mxenge and Rustum

Mohamed with Willie Claassen (CEO, Eastern

Cape Biomass).

business of the CDC has grown to include services to the Provincial government on major infrastructure projects, in addition to the investment community.

An internal business unit, known as CDC Services (CDC-S), has been set up with the single objective of focusing on the delivery of these projects. The portfolio of this unit has almost trebled in a period of three years, bearing testimony to the enduring partnership between the CDC and the Provincial Government of the Eastern Cape. Projects currently in the portfolio are for the following departments: Economic Affairs and Tourism, Education, Health, Sport Recreation and Culture, Public Works, Roads and National Department of Public Works.

Lastly, the Coega Human Capital Solutions (CHCS) has developed nationally recognised best practice in large and complex infrastructure projects. CHCS is a business unit within CDC, with a unique and integrated package of solutions, which brings together human capital development, business development and labour management. These solutions are provided within a regulated framework of contractual agreements that the CDC maintains.

The CDC has been exploring ways in which it could become financially sustainable. Pioneering work done by CHCS and CDC-S, in particular, present the CDC with revenue generating opportunities. A lot of interest has, as a result, been shown by a number of large organisations involved in infrastructure projects. This presents a golden opportunity for the CDC to take its rightful place among organisations making a sizeable contribution towards addressing the most pressing needs of our country, particularly in the areas of social and skills development.

Socio-Economic Impact

Safety, Health and EnvironmentParamount to the work of the Coega Project is the health and safety of our community and environment.

Integral to every investment opportunity that we pursue is a due diligence exercise, which ensures that the issues of safety, health and environment are observed.

The CDC is also represented in relevant local structures attending to safety, health and environment issues.

Key Provincial and Local ConsiderationsThe Coega Project is located within the Nelson Mandela

Bay Municipality (NMBM), in the Province of the Eastern Cape. The CDC aligns its programmes with those of the Eastern Cape Provincial Government, taking account of the following:

Socio economic profile of the Eastern Cape National planning framework and priorities Provincial Growth Development Plan (PGDP) Cluster priorities Eastern Cape competitive advantages Priority economic sectors

The CDC continuously engages with relevant players in seeking to find answers to the following types of questions:

How to extend benefits of new investments into the broader sub-region (supply chains and linkages);

How to extend benefits of technical capability to the province as a whole (surplus capacity) around project planning, project management, investment facilitation, research, etc.;

Strategic linkage with NMBM and Province; Competition between IDZs (delineating market share); IDZ clusters versus Provincial clusters; Leverage infrastructure, human capital, research &

development and logistics capability for provincial benefit;

How to best participate in provincial processes; and Joint/Collaborative branding across the region.

Black Economic EmpowermentSocio-economic transformation, through preferential procurement practices, is integral to the CDC’s mission, namely, “To provide a competitive investment location and a total business solution for customers, and ensure sustainable economic development.”

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Ms Zodwa Lali (Chief Director, Department of Trade and Industry)addresses the Lower Saxony Delegation at the Coega IDZ.

Left: Douglas Mbopa High School pictured at the Port of Ngqura during a site tour to the Coega Project in National Construction Week 2006.

Our procurement policy makes particular reference to active participation of the previously disenfranchised, including women, youth and the disabled.

Particular focus will be made in the upcoming financial year to actively monitor and evaluate the overall social impact the CDC is making in this critical area of empowerment.

Internship ProgrammeThe CDC’s internship programme has grown from strength to strength. In the last financial year, the CDC accepted close to 50 interns and assigned them to the various business units, including the Office of the CEO.

It is gratifying for the CDC to note that those that take advantage of the opportunities presented by this programme soon find employment upon completion. A case in point is that of Mbuyiseli Mpengu, an HR/IR Intern at Human Capital Solutions, who left the CDC to join the Provincial Economic Affairs Dept as Parliamentary Liaison Officer.

Mbuyiseli had this say about the programme: “I would like to take this opportunity to express my sincere gratitude for the professional and personal development that has been provided to me. Honestly, being the member of the Coega family was an achievement on its own. I have enjoyed working for CDC, and appreciate the support provided to me during my tenure with the company.”

This is another reason the CDC continues to invest in socio-economic development and transformation through its internship programme.

Recognition and AwardsThe pioneering work of the CDC rarely goes unnoticed. The last year was no exception. We are proud of Duraan Martin, a learner in the Coega Expanded Public Works Programme (EPWP), for being recognised as the best EPWP supervisor in the country. This took place at the inaugural Expanded Public Works Programme Recognition Awards ceremony, held in Johannesburg, on February 15, 2007. Outlook

The CDC is bullish about the future prospects of the Coega Project. It is in this light that the business has once again cast its eye on the horizon and set itself bold and ambitious targets.

The CDC continues to be guided by its number one priority, the customer. The CDC will strengthen internal capacity, particularly in the area of research and development. We also feel the time is ripe to make serious inroads in emerging sectors, such as Business Process Outsourcing & Off-shoring (BPO&O) and leveraging our investment in leading edge technologies and systems.

Much work still remains in a number of areas, particularly the legislative framework and the incentives regime. Effective operation of the IDZ also demands an integrated effort between all the relevant parties, such as Eskom, Transnet, Transnet National Port Authority (TNPA) and the Nelson Mandela Bay Municipality. The CDC will continue to confront these and other challenges, confident in our collective ability to find lasting and workable solutions.

Acknowledgements

Firstly, I would like to thank the Chairperson of the Board, Mr Moss Ngoasheng, and the rest of the CDC Board for their exemplary leadership in steering this organisation to greater levels of excellence. Our people remain our most important asset, and there is no doubt in my mind that nothing would have been possible without their continued dedication and commitment.

I pay tribute to our political authority at both national and provincial level. Much of what we have achieved has been through their active support and sponsorship of the Coega Project.

We would like to thank, in particular, Minister of Trade and Industry, Mr Mandisi Mpahlwa; Minister of Public Enterprises, Mr Alec Erwin; Mr Trevor Manuel, Minister of Finance; Premier of the Eastern Cape, Mrs Nosimo Balindlela, and the Provincial Cabinet, Executive Mayor of Nelson Mandela Bay Municipality, Ms Nondumiso Maphazi; the Business community of Nelson Mandela Bay and all other stakeholders and strategic partners of the Coega Project.

Pepi SilingaChief Executive Officer


Odwa Mtati (CEO, Port Elizabeth Regional Chamber of Commerce and Industry – PERCCI) delivers his keynote address at the Coega LearnershipHost Employers certificate awards ceremony.

Geoffrey Qhena (CEO, Industrial Development Corporation – IDC) with Michel Jacques (Sr Vice President, Alcan Inc. and incoming President and CEO Alcan Primary Metals) at the signing of the Finance deal for the Coega Aluminium Smelter.

Background

CDC Services (CDC-S) is a special purpose vehicle Unit of the CDC, aimed at providing assistance on infrastructure development to the Eastern Cape Provincial Government. It focuses mainly on fast-tracked projects, where rapid delivery is required. The involvement of the CDC in provincial projects was informed by the fact that:

(a) One of the CDC’s corporate objectives is to advance socio-economic upliftment in the Eastern Cape, with its involvement in the provincial projects enabling it to contribute meaningfully in this regard;

(b) The CDC considers its involvement in provincial projects as some form of contribution towards Corporate Social Investment, because of the number of people who benefit from the projects that it rolls out;

(c) Involvement in the development of critical infrastructure in the province assists in unlocking and realising sustained economic development; and

(d) The CDC needs to ensure that there is meaningful backward integration with the province, which is enhanced via the provision of basic infrastructure that in turn improves the attractiveness of the province to investments, which the CDC needs to attract to the Coega IDZ.

Services

The services provided by CDC Services include:

(a) Project facilitation, i.e. assisting in conceptualising projects and transforming them into plans that can be implemented;

(b) Act as an Implementing Agent on behalf of government, with respect to rolling out infrastructure projects;

(c) Assist in developing monitoring systems on infrastructure roll-out and to carry out monitoring and reporting on infrastructure budget expenditure.

CDC SERVICES Key Highlights

Since its inception, CDC Services has implemented a number of projects on behalf of the Provincial Government and continues to do so. Although CDC-S considers all the projects that it embarks upon as being of utmost importance, a few current projects with its involvement and highlights for the 2006/07 Financial Year were:

(a) Conceptualising, planning and upgrading both the Cecilia Makiwane Hospital in Mdantsane and the Frere Hospital in East London, where it is assisting the Eastern Cape Department of Health;

(b) Conceptualisation, planning and development of the first Sport Academy in the Eastern Cape Province for the Department of Sport Recreation Arts & Culture; and

(c) Implementation of 51 schools throughout the Eastern Cape Province, for the Department of Education, under the Expanded Public Works Programme.

The CDC, via CDC-S, will continue providing the necessary support to the Provincial Government, particularly in infrastructure development, as an Implementing Agent in pursuance of the dire need to improve the socio-economic status of the Province, as well as contributing to the realisation of the objectives of the Provincial Growth & Developmental Programme (PGDP).

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Delegates attending a CDC Services strategy session.

Christian Martin (MEC Public Works gets hands-on during his site visit to the Coega IDZ to review the progress of EPWP Learnerships in Zone 2.

(Left to right) Daluxolo Jekwa (National Chairperson, Merseta) and Jamangile Mbana (CEO, East Cape Midlands College) during the Signing of the Service Level Agreement


An aerial view of Zone 1 North, where the new multi-tenanted facility is under construction.

The contractual value of the projects initiated over the financial year under review is R420 million, which amounts to the exact and total quantum spent on infrastructure projects over financial year 2006/7.

These projects were undertaken mainly in Zones 1, 2 and 3 and comprise the completion of municipal infrastructure phases, the new CDC Office Block, the investor warehouses, roads infrastructure project at the back of the CDA: MR435 and the N2 doubling and upgrading on the East of the Coega River.

Successful SMME participation

Through these projects CDC encouraged the increased participation of Small Medium and Micro Enterprises (SMMEs). In comparison to previous years, a definite growth is evident in the numbers of this grouping in implementing CDC projects. There has also been an emergence of new contractors, who have not previously worked in the IDZ. This, we believe, is as a result of the Imbizos that were conducted towards the second half of financial year 2006/07.

The fact that we were able to sign nine investors in this financial year was largely precipitated by the operational readiness of the core development area, which gave investors a sense that they would not have to wait for a period longer than six months before they are able to establish the appointed contractors on site.

Focus and strategy

Over the past financial year we focused on two things: The first was to package our operational plan into three components, to make it easy for our service providers to select the work that they are most competent to undertake. These were Programme 1: Municipal Infrastructure projects, Programme 2: Commercial/ Investor-specific projects and Programme 3: General Zone Development projects.

INFRASTRUCTURE DEVELOPMENT Secondly, we decidedly undertook to “de-bulk” our contracts into sizeable packages, so as to encourage small and medium-sized contractors to participate. Historically, our contracts had huge values, which in itself meant that only well-established contractors, who are able to tender on contracts of over R50 million, were targeted. This practice obviously cast a shadow on the organisation’s intent to advance socio-economic objectives and encourage previously disadvantaged contractors to respond to CDC tenders.

Meeting socio-economic objectives

Unbundling our contracts meant we were now in a position to target contractors graded by the Construction Industry Development Board (CIDB) as capable of undertaking work with a contract value of between R5 million and R30 million, thereby facilitating the existence of a new breed of contractors, whose development would be managed over a period of time. Through this act we have meaningfully contributed to developing credible capacity in the Eastern Cape contracting fraternity.

Not only have small and medium-sized companies been given an opportunity to build a world-class IDZ, but they have also been given an opportunity to upgrade their track-record, which then affords them a better profile and grade with the CIDB.

Operational readiness

The target of the Infrastructure Development business unit over the 2006/07 financial year was to ensure at least 80% operational readiness of the core development area (Zones 1-5). This in itself would have meant that any investor choosing a site in any of these zones would have then been in a position to have a contractor established on site within a period of six months.

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“Let us be hard at work in building a world-class IDZ of which we can all be proud”The only zone we experienced a challenge in achieving this noble target was Zone 2 (Automotive Cluster) for its second phase.

Overall challenges and lessons learnt

We are faced with two main challenges: In the first place, insufficient contracting capacity in Nelson Mandela Bay and its surrounds, which we believe are being addressed so that it does not become an insurmountable challenge into the future.

Secondly, our ability to improve on the procurement pipeline/timeframes, which started off as a challenge at the beginning of the financial year, but we can confirm that we have dealt with this challenge.

We were encouraged to market the project better, articulate the opportunities available for all construction practitioners, be more vigilant in interacting with our stakeholders to increase the understanding of the industry regarding the project and also solicit an increase in their participation.

The second lesson we learnt was that we are actually playing a leading role in the province, in our appreciation of public sector procurement objectives; we learnt that we are able to fast-track procurement, whilst at the same time achieving the developmental objectives of government.

Future opportunities

It is evident that we need to have stakeholder forums at least twice a year, during which we reach out to industry

and advise on the size of the infrastructure portfolio so that all practitioners can best position themselves.

Future opportunities include more work for every contracting practitioner. There is a budget of R1,1 billion worth of work, and our intention going forward is to ensure that 30% of the value of that portfolio goes to SMME’s. We are determined to make it happen.

Moving forward

Our message on the built industry, particularly focusing on coming projects, is Kuguga ifosholo! (Loosely translated, this slogan means: “Let us be hard at work in building a world-class IDZ of which we can all be proud”).

Above: Trainees placed at East Cape Training Centre in a practical earthworks training programme, to enhance skills development.

Left: Biomass production facility.

Salt Works Bridge under construction alongside the N2.


In dealing with the challenge of skills shortage, CDC established the Coega Human Capital Solutions (CHCS) Business Unit dedicated to focus in this area, with a view to converting this challenge into a competitive advantage of the Coega IDZ.

CHCS is responsible for providing highly-developed human capital and a managed labour environment to investors in the IDZ, Nelson Mandela Bay (NMB) and the Eastern Cape Province. This is done through providing a service of unique packaging of integrated services, underpinned by an advanced labour management information system and employee relations framework, specifically suited to support the management and development of mega projects.

Focus areas

CHCS has five functional areas enabling it to carry out its business, namely: Employment Relations; Recruitment and Placement; Training & Human Resource Development; SMME Development and Investment Promotion Support & Business Development.

The challenge of skills shortage within the broad fields of Science, Engineering and Technology, although not peculiar to the Nelson Mandela Bay Municipality or the Eastern Cape Province, has a potential negative impact on investment attraction. This has informed the model and framework of CHCS as adopted and established by the CDC. This business unit has proactively developed, implemented and improved an integrated human capital development solution, with the aim of ensuring that the Coega IDZ, Nelson Mandela Bay and the Eastern Cape have a competitive advantage in attracting investors and Foreign Direct Investment to the Province.

Sectors served

The model is informed by years of experience in process and system management of labour and human resource management and planning for mega projects, within a

regulated environment. This is also based on research, analysis and forecasting on skills types and skill levels that will be required by investors locating to the Coega IDZ, NMB and the Eastern Cape Province. As such, in 2004 CHCS started a process of determining how the skills shortage would impact on the IDZ, region and province at large. This process was, and continues to be, linked to the Eastern Cape Provincial Growth & Development Plan (PGDP) and focuses on the following sectors:

Energy Manufacturing Information, Communications & Technology (ICT) Metals Automotive Chemicals Services Tourism Agriculture Construction

It has also identified the skills shortage challenge, which is further exacerbated by the low number of students undertaking qualifications within these sectors, both in FET colleges and from higher education institutions. On the other hand, the CDC database of about 72 000 job-seekers reflects a huge percentage of unemployed people, with work experience within the sectors mentioned above and particularly in the construction sector, who do not have formal qualifications that recognise such experience.

The role of CHCS, in respect of the above, has been to design strategies that will ensure that more learners undertake qualifications that allow them to be absorbed within these sectors. For the unemployed job-seeker, with work experience and no qualifications, CHCS has designed training initiatives, such as the provision of Adult Basic Education & Training (ABET) programmes and Recognition of Prior Learning (RPL) processes, that will ensure the formalisation of qualifications as well as provision of skills.

HUMAN CAPITAL DEVELOPMENT

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Building partnerships with stakeholders

A critical success driver of CHCS, in implementing its solution and services, is to build solid partnerships with various stakeholders and key players within the Human Resource Development (HRD) field. This, in CDC experience, has proved correct.

Stakeholders include approximately 164 businesses in the manufacturing and energy sector operating in Nelson Mandela Bay. These stakeholders provide workplace experience to a total of 507 learners (with workplace experience being provided to 407 learners by 82 companies in the Mechanical sub-sector and 163 learners by 64 companies in the Electrical sub-sector); the Nelson Mandela Bay Municipality (EDTA Business Unit); all the Eastern Cape-based universities, particularly the Nelson Mandela Metropolitan University, the EC-based FET Colleges (East Cape Midlands; Ikhala College and PE College); accredited Training Providers operating within these sectors; various SETA’s (MERSETA; ESETA; CETA; S-SETA & CHIETA); Departments of Labour, Education, Public Works and the Office of the Premier.

Stakeholder involvement is aimed at ensuring that all aspects of the HRD initiatives are addressed, and that the curricula offered by FET Colleges and HETs respond to the labour market requirements. The successful implementation of the Learnership and Skills Programmes is dependent on the availability of workplace providers for the experiential training, hence the critical role played by the business sector.

The CDC has also partnered with the Department of Public Works for the roll-out of infrastructure programmes in the Province. It has a targeted over 2 000 jobs to be created in this financial year, over and above the 30 Expanded Public Works Programmes (EPWP) contractors in the IDZ, who have been awarded contracts of over R66 million.

One of the key projects CHCS is involved in is the development of the HRD strategy for NMB. This has

been done in partnership with NMB’s Economic Affairs and Development Business Unit, with a view to ensuring an integration of support mechanisms to all investment initiatives for NMB and its surrounds, in particular the HRD aspect.

This HRD strategy and plan is informed by the Metro and Province’s economic activities/investment pipeline. It is aimed at determining the skills gaps and assessing the required interventions to close these gaps. For example, the skills shortages experienced in the Metro are in the Electrical/Mechanical; Construction (civils, building and piping); Manufacturing and Engineering and Call Centre disciplines. There is a shortage across levels, and CHCS has taken a phased approach in addressing this problem.

HRD and training initiatives

During the financial year under review, MERSETA and Energy SETA have committed to training 300 learnerships per year over the next five years. This was commenced in 2006. The National Skills Fund has allocated R100 million to the Eastern Cape over the next three years, to address critical skills shortage informed by the investment pipeline and critical infrastructure projects.

The Department of Labour, through the Social Develop-ment Fund, is playing a significant role in funding training for the unemployed through skills programmes. In 2006, the CDC motivated to MERSETA for the establishment of a training facility to focus on welding as one of the scarce and critical skills. This pioneering initiative resulted in the establishment of the first Centre of Excellence for Welding at East Cape Midlands College – the first of its kind in the country. The facility has acquired international accreditation, for provision of high skills requirements for the welding and related trades.

CHCS is also working with the Joint Initiative for Priority Skills Acquisition (JIPSA) team, which is part of the Accelerated and Shared Growth Initiative of South Africa (Asgi-SA), with the aim of contributing towards the 6%

Learners on the Adult Basic Education and Training programme � an initiative to increase

the literacy rate in the region.

Delegates attending the SACCOM BPO workshop for the Eastern Cape.


economic growth target. The JIPSA focus is mainly on recruiting graduates that will be placed on exchange programmes and skills development initiatives, nationally and internationally. Upon completion of this training, the intention is that they return to the Eastern Cape.

Below is a table reflecting actual numbers of the CDC Learnership Programme. The learnership programme is just one of the programmes aimed at addressing the skills shortage.

Recruitment and placement

The CDC has realised that developing and utilising local human capital will only be achieved when a proactive HRD strategy is implemented to meet the short, medium and long-term requirements of investors. The Labour and Business Management Information System continuously improves and allows for the recruitment, selection, screening and induction of suitable local work-seekers. Currently, the CDC database has approximately 73 534 work-seekers. The database has built-in systems that are able to track and provide instant reports on all candidates trained, skills areas and skills levels in which trained, as well as candidates employed in the various projects within the Coega IDZ and those that are off-site.

SMME development

The CDC, through CHCS, is facilitating the advancement of local ABE/SMMEs through the application of custom-designed systems to ensure optimum access to training, development and support services as well as business opportunities.

The process is integrated into the full project cycle of all Coega IDZ infrastructure projects, and through a process of refinement on these projects will be available to other investors in the IDZ with similar objectives. Opportunities exist in Coega IDZ infrastructure projects, mainly for construction sector ABE/SMMEs. In addition, space for participation may exist for other sectors, e.g. printing (signage, etc), supply of work wear, toilet hire, transport, security, training providers, catering, carwash, bookkeeping and business services suppliers, etc.

ITEM NUMBER

Contractor awarded (CDC only) 125

Sub-contracts awarded (CDC only) 624

Job Seeker Pool 73,534

Labour requisitions processed 1,045

Lost time as a consequenceof labour strike action 0.12%

Cumulative man-hours on-site to date 18,961,114

Currently employed (22 May 2007) 2,472

% Current Employment for residentsof Nelson Mandela Bay 89.7%

% Current Employment for residentsfrom outside Nelson Mandela Bay 10.3%

Total wage bill for hourly paid employees R168,128,540

Total employment created 17,200

NQF Level NSF ESETA MERSETA TOTAL %

2006 / 20071 0 0 0 0 0%

2 0 300 522 822 40%

3 0 0 0 0 34%

4 0 0 0 0 26%

TOTAL 0 300 522 822 100%

2007 / 20081 0 0 0 0 0%

2 144 105 120 369 40%

3 216 195 180 591 34%

4 12 0 0 12 26%

TOTAL 372 300 300 972 100%

2008 / 20091 0 0 0 0 0%

2 0 15 12 27 40%

3 180 105 96 381 34%

4 84 180 192 456 26%

TOTAL 264 300 300 864 100%

2009 / 20101 0 0 0 0 0%

2 0 60 42 102 40%

3 0 75 66 141 34%

4 12 165 192 369 26%

TOTAL 12 300 300 612 100%

FIVE YEAR TOTAL1 0 0 0 0 0%

2 144 480 696 1320 40%

3 396 375 342 1113 34%

4 108 345 384 837 26%

TOTAL 648 1200 1422 3270 100%

INVESTMENT PROMOTION

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CDC personnel hosting an Austrian trade commission

Creating the right environment for investment, and establishing locations for investment, is very important.

The financial year 2006/2007 proved to be the year CDC’s Investment Promotion commitment came into its own, with nine out of a target of ten investors signed up. The total investment is valued in excess of R20 billion, and is led by the Alcan aluminium smelter project at R20 billion.

The investors signed up in the financial period under review, is indicative that the Coega IDZ has all the right ingredients for companies looking for world-class infrastructure to support their manufacturing and movement of goods.

Project prioritisationThe Investment Promotion strategy has been focused on streamlining the project list to prioritise those projects that have potential to yield more investment. The emphasis is on those projects that do not have a long-term turnaround, to ensure that delivery time is reduced, with allowances made for projects that have to go through the EIA (Environmental Impact Assessment) process or undertake feasibility studies.

In recognition of the CDC mandate, Investment Promotion has a team of investment managers allocated in various geographical regions, such as North and South America, Europe, South and South East Asia, Far East and Middle East.

The Sector Manager identifies key priority sectors and investment projects in their sector. Synergies in investments are considered as well as if there are companies in South Africa that are related. To avoid saturating the market and/or sector, further research establishes if there are companies in South Africa already servicing that sector together with the level of investment and operation.

Marketing at home and abroadMarketing and sales activities included trade and fact-finding missions – local, national and international – where targeted visits to investors paved the way forward.

The key outward missions were undertaken to all the targeted regions in the BPO&O, chemicals, automotive, metals, metallurgical, agri-processing and logistics sectors. The contacts established will form part of the pipeline going forward.

There has been a substantial increase in the number of visits by potential investors, which is anticipated to continue. This interest has come mainly from companies in the logistics and manufacturing sectors and those relating to port activities. While the automotive sector offers great potential, specific interest is evident from companies serving bigger projects, particularly Alcan.

The CDC hosted visiting delegations and representatives from Germany, Netherlands, Russia, Canada, Vietnam, South Korea, Japan, China, Uganda, India, Kuwait, Austria, Indonesia, Australia and Thailand. Some countries sent multiple teams, with the lead sectors generating specific interest continuing to be automotive, chemicals, BPO&O, logistics and metals.

Investment and the CDC Value PropositionWe have sought to attract companies, which have a strategy to locate in other countries, how that aligns to the CDC Value Proposition and how their strategy markets the Value Proposition. We also seek to lure the investor based on the incentives offered by national government and the services available from CDC.

Regional sector focus ensures that whatever we do, all our efforts and activities are aimed at marketing the CDC Value Proposition and the expansion of our market in the key priority investment sectors currently pursued by the CDC, in the following sectors:

Metals / Metallurgical Ferro Chrome Stainless Steel Iron and Steel Slabs Aluminium Beneficiation Metals Fabrication

Agri-processing

Automotive Automotive components Original Equipment Manufacturers (OEMs)

Services BPO&O (Financial Shared Services Centre) Call Centre

Chemicals Organic (Petrochemicals) Inorganic (Chlorine)

Energy Alternative Energy Sources (such as Liquid Natural

Gas − LNG)

Investor incentivesNational government offers investors a range of incentives matched to projects. CDC offers companies services, with its basket of incentives being those that are offered by the dti. Incentive for investors to choose the Coega IDZ include: Rezoned Land Serviced Sites Flexible lease and utility prices Land for leasing

The strategy of the BPO&O sector mainly ensures that the network is increased for those sectors that are not dominant in the region. In terms of CDC strategic partnerships, for those sectors that are viable for the organisation, we go beyond the mandate to establish working relationships to impact the investor base and investor interest.

The Department of Trade and Industry’s objective of the incentives was to position the country as a global outsourcing hub, through the Government Assistance and Support (GAS) programme. The programme seeks to remove red tape hampering both new and expanding BPO players’ entry into the country.

Alcan – the benchmark for collaborationThe Alcan project is a showcase example of the CDC Investment Promotion network and strategy in operation. This was a collaborative project involving several role players including dti, the Industrial Development Corporation, Eskom and the CDC. It is the first project to benefit from the dti’s Developmental Electricity Programme, which is designed to stimulate energy intensive investment in South Africa.

We work closely with national government, through the marketing arm of the Department of Foreign Affairs, who refer scheduled delegation visits to South Africa and the sectors of interest. This relationship ensures that they identify synergies that fit into the Coega IDZ, which are pursued by Investment Promotion.

The Department of Foreign Affairs finds investors with interests in South Africa and the spin-off for us is that, even though they may not directly relate to Coega, we make contact with them as a brand-building exercise. This agreement creates opportunities for marketing the Coega IDZ, and the information is valuable as it cuts across local business, where the CDC has working relationships with the local business chambers and entities to bring investment into Nelson Mandela Bay and the Eastern Cape.

Key industry sectorsSix industry sectors, divided into a number of sub-sectors, have been identified to be targeted. These are the automotive, metals, metallurgical, chemicals, services (BPO&O) and energy (i.e. power generation). Weaving across these sectors would be services such as logistics and maintenance. In addition to this, the CDC has also considered the countries and/or regions to pursue for Foreign Direct Investment (FDI) in relation to these industry sectors.

The first infrastructure investments in the Coega IDZ are focusing on areas where the investors have to locate. Infrastructure implementation in Zones 1 – 5 include a combination of 1st and 2nd Tier infill, where sites are ready for immediate occupation. Zones 1 – 5 have been identified to locate the following activities: 1 (electronics and commercial), 2 (automotive), 3 (medium manufacturing, agri-processing), 4 (Academic and training, Services) and 5 (medium to heavy manufacturing).

Infrastructure implementation philosophy of the zone can be seen as Bulk Distribution (1st Tier) of Services in the actual industrial sectors, which will be followed by Secondary Distribution (2nd Tier) servicing up to the site boundaries, and finally site services (3rd Tier) for specific investor requirements.


CDC personnel(front right and

second from right) Nokwanda Benya and Nonkululeko Mxenge and local businessman

Andrew Jordaan (back right) with

members of the Hanpac Technologies ( South

Korea) delegation.

25

Pictured during the visit of the German trade delegation are (left to right) Dave Coffey (former PERCCI President), Rustum Mohamed (CDC), Kutloano Headbush (Nafcoc Eastern Cape President), Executive Mayor of Nelson Mandela Bay, Nondumiso Maphazi, and members of the delegation.

New international business facilityThe CDC’s operational 200-seat pilot call centre has set the stage for the construction of a new international business facility, which will house a 1 500-seater call centre and cater for operations involved in Business Process Outsourcing & Off-shoring (BPO&O), a sector which has been identified as one of the priorities of growth under the government’s Accelerated and Shared Growth Initiative (AsgiSA) programme.

The new centre, which will be built in two phases, is part of the CDC product offering to attract local and international investors in the BPO and call centre industry into the Coega IDZ. The 16,000m² building will be constructed on a 5ha site at an estimated cost of R125-million.

Moving forwardThe past year has been focused on working with what was in the pipeline, while the year ahead will continue with what was in the original pipeline, together with new investments that are being targeted. We are focused on growing investment, with another 10 investments targeted for the 2007/8 period. Significant signs of increase in investment will be visible after the Port of Ngqura starts operation in 2009, but right now we have to build the pipeline in a dedicated and focused manner to grow to that point.

Investor needs differ. However, the common factor is the cost of doing business and it is evident that one of Coega’s strategic positions is its ability to cut the cost of doing business. This is enhanced by a stable social and political environment, availability of services, labour costs, skills development, transport network and its central location in relation to the rest.

In the South African context, this is the right time and the Coega IDZ is the right place and right choice for a range

Investor Name Project Description Operation date Investment Value Sector/Zone

Dynamic Commodities Fruit processing for export Operating and started exporting. R75 million Agri-processing/Zone 3

SATI Container depot April 2008. Construction starts mid-2007. R50 million Logistics/Zone 1

General Upholsterers/Accoustics Manufacture of vehicle interior trimfor the domestic and export markets Mid-2007 R50 million Automotive/Zone 3

Biomass Biomass fuel Mid-2007 R50,8 million Energy/Zone 3

Coega Concrete Products (Pty) Ltdt/a Bosun Brick Port Elizabeth

Manufacturer and distributor ofpre-cast concrete products andin particular paving bricks

Mid-2007 +R50 million Zone 4

Cerebos Salt production November 2007 R60 million Chemicals/Zone 7

Alcan Aluminium smelter Mid 2010 R20 billion Metallurgical/Zone 5

PE Cold Storage Cold storage/export facilities April 2008. Construction starts mid-2007. R50 million Logistics/Zone 1

MSC Container depot Early 2009 R50 million Logistics/Zone 2

LIST OF PROJECTS SIGNED UP IN FINANCIAL YEAR UNDER REVIEW

COMMENTS

The statements and comments by key role-players are indicative of the status Coega has achieved:

“The reliable supply of cost-effective power to the proposed smelter in Coega has been key to Alcan’s decision to invest in South Africa. It confirms that South Africa remains a competitive and preferred destination for energy intensive investments.” Alec Erwin (Public Enterprises Minister, South Africa and former Minister of Trade and Industry)

“The infrastructure built around the Coega project was a fundamental aspect to us making the decision to go ahead. It’s one of the best infrastructures I have seen throughout the world.” Cynthia Carroll (former Alcan Primary Metal Group President and now CEO of Anglo-American).

“Key elements of GAS include marketing, easy entry into South Africa for both new and expanding BPO operations, skills development, simplified administrative procedures and other investment incentives.” Mandisi Mpahlwa (Minister of Trade and Industry, South Africa)

“The opportunity to design and build a plant from scratch, without the constraints of legacy also counted in favour of Coega.” Willie Claassen (CEO, EC Biomass Fuel Projects)

of investors across manufacturing, logistics and services sectors. Other locations are running out of prime industrial space and investors have very few options, but with the deepwater Port of Ngqura and the Coega IDZ, we have all the right ingredients to become the preferred investor destination in South Africa.

CORPORATEGOVERNANCESTATEMENT

GOVERNANCE STRUCTURESThe Coega Development Corporation (CDC) has once again achieved excellent results. Right from the outset, the organisation challenged itself to pursue above average targets in all of the Corporation’s objectives, particularly investment promotion and job creation.

Board of Directors: MM Ngoasheng (Chair) PP Jourdan J de Bruyn MM Kwenaite LV October LW Maasdorp S Nondwangu M Matshamba MP Silinga (Executive) Audit & Finance Sub-Committee: X Ncame (Chair) A Mjekula L V October A Radhakrishna LW Maasdorp MP Silinga (Attendee)

Investment Sub-Committee: PP Jourdan (Chair) MM Ngoasheng M Kwenaite BS Rayner G van Wyk MP Silinga (Attendee)

Human Resources: J De Bruyn (Chair) PP Jourdan MM Ngoasheng S Nondwangu MP Silinga (Attendee)

Company Secretary: M Pango (Acting)


Phil H Gutsche (Chairman, Coca-Cola Sabco), Rustum Mohamed (Executive Manager: Investment Promotion, CDC), His Excellency Kweronda Ruhemba (Ugandan High Commissioner), Maged El Gamal (Executive Assistant to the CEO, Coca-Cola Sabco), Colin Rushmere (Chief Financial Officer, Coca-Cola Sabco) and Gustav Meyer (Manager: Investment Promotion, CDC).

The German delegation on a fact-finding mission in South Africa, pictured at the Port of Ngqura during their visit to the Coega Project.

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MOSES M NGOASHENG(Chairperson) Appointed: 1 July 1999

Ngoasheng holds a BA Economics and Inter-national Politics from the University of South Africa (UNISA); a BSoc. Sci Honours – Industrial

Sociology (First Class) University of Natal; and an MPhil Development Studies (First Class) from the Institution of Development Studies at the University of Sussex Brighton, UK.

Currently Executive Chairman Safika Holdings, Ngoasheng is a past economics advisor to President Thabo Mbeki and has consulted for major South African corporations on Business Strategy, as well as the World Bank.

He co-directed and conducted seminars on ‘Technological and Organisational changes in the world Economy – Lessons for South Africa’.

DR PAUL JOURDAN(Deputy Chairperson) Appointed: 1 July 1999

Dr Jourdan holds a BSc. in Geology and a BA in African Government from UCT; a Post-graduate Diploma in Exploration

Geophysics from ITC in Delft, Netherlands; a PhD in Politics from Leeds University, UK; and an MSc. in Mineral Economics from Wits University.

He is currently president and CEO of Mintek. As Deputy Director General in charge of Special Projects in the Department of Trade and Industry, Jourdan was responsible for the establishment of Industrial Development Zones pioneered by Coega. He is founder and vice chairman of the Boards of both the Minerals & Energy Policy Centre (MEPC).

JAN DE BRUYNAppointed: 1 July 1999

De Bruyn holds a BSc., BEng. (Civil) from Stellen-bosch University; a MBL (Cum Laude) from the University of South Africa (UNISA); and an AMP diploma (Harvard

University).

After a 32-year career, he retired from the Industrial Development Corporation of South Africa (IDC) as Deputy Managing Director. De Bruyn initiated the building of the first factory flat in Soweto, co-ordinated the establishment of the Small Business Development Corporation (SBDC), the sale of Metropolitan Life to an empowerment group and the development of the Saldanha industrial area.

He served on the boards of the SBDC, Algorax (Chair), Hulett Aluminium, Gencor, Saldanha and Steel (Chair) and MDP (20 years, with 10 as Chair), as well as on the executive of the Johannesburg Afrikaanse Sakekamer and the AHI (Afrikaanse Handelsinstituut).

MAOBELO M KWENAITEAppointed: 1 June 2001

Kwenaite holds a BA in Social Science from the University of Cape Town. He is currently the chairperson of Recreation and Culture Business Unit of the Nelson Mandela Bay

Municipality and a member of the Mayoral Committee.

He also serves as a Member of Sub-Committee: Economic Development Nelson Mandela Region: ANC. Prior to this he was the Business Development Manager for East Cape Transformers. He was also the Research and Development Project Manager for the Western District Council.

PROFILES - CDC BOARD OF DIRECTORS


LIONEL OCTOBERAppointed: 1 August 2002

October holds a MSc. in Economics; a Post-graduate Diploma in Economics from the London UK School of Oriental and African Studies; and a BA (Hons) in development studies and a BJuris. from the University of the Western Cape.

He is currently Deputy Director-General for Enterprise and Industry Development at the Department of Trade and Industry (dti). Prior to holding that position, he was Chief Director at dti.

October also served as a senior commissioner and Regional Director for the Commission for Conciliation, Mediation and Arbitration. His experiences as a labour leader include holding the positions of General Secretary of the South African Clothing & Textile Workers Union and Legal Officer for the Garment Workers Union of the Western Province.

His awards include the Helen Suzman Scholarship in 1995 and ODA Scholarship in 1996. He has also published papers on population and the clothing industry.

LESLIE MAASDORPAppointed: 5 August 2004

The International Advisor for Goldman Sachs Inter-national, and presently serves as a Board Member in the following entities: Trade and Industry Policy Secretariat (TIPS), an

advisory body to the Minister of Trade and Industry; Chairman – Trans Caledon Tunnel Authority (TCTA); Vice Chairman, South African Weather Services; ABSA Group; Fujitsu Services SA; Deputy Director General & Head of Restructuring for State-owned Enterprises; and the Board of Governors at Hilton College.

He was the advisor to Tito Mboweni, during his tenure as Minister of the Department of Labour.

SILUMKO NONDWANGUAppointed: 5 August 2004

Nondwangu is the General Secretary of National Union of Metalworkers of South Africa (NUMSA). He currently serves on the Board of Directors of the following entities:

Development Bank of South Africa (DBSA) and the National Labour & Economic Development Institute (NALEDI).

His humble beginnings in the labour front started when he worked as a Local Organiser for NUMSA on full-time basis in 1991. He was then appointed as an Education Officer, responsible for the training of shop stewards, from the basic to advanced levels of political economy.

Nondwangu also served in the Congress of South African Trade Unions (COSATU) Executive Committee, and represented the Federation in the Eastern Cape Provincial Economic & Development Forum. He was elected as the Eastern Cape Regional Secretary of NUMSA in 1997. In 2000, he was elected to the position he currently holds, as the General Secretary of NUMSA, and also represents NUMSA in the International Monetary Fund (IMF).

MXOLISI MATSHAMBAAppointed: 26 March 2007

Matshamba holds a B.Comm from the National University of Lesotho; a Certificate in Petroleum Economics & Policy (Wits University), and Articles of Clerkship, as a Trainee

Accountant, from Price Waterhouse.

He is the Chief Executive Officer of the Eastern Cape Development Corporation (ECDC). Before joining the ECDC, he was the Acting Chief Executive Officer of Trade and Investment South Africa (TISA), a division of the Department of Trade and Industry (dti).

29

PROFILES − AUDIT & FINANCE SUB-COMMITTEE

XOLILE NCAME holds a B.Compt from Unisa, a Post-graduate Diploma in Accountancy – CTA (UPE), and has attended and completed various programmes, including the Professional Development Programme (City Uni-versity, New York), Senior

Management Programme (Henley Management College, UK), a Diploma in Financial Markets and Instruments (RAU) and an MBA (Wits Business School).

His academic achievements include Top Student in South Africa – Management Accounting Control Systems and has two qualifications from the SA Institute of Chartered Accountants – CA (SA), as well as one from the Chartered Institute of Management Accountants – ACMA (CIMA, UK).

He is currently the Land Bank Chief Financial Officer (CFO). Prior to that, he was responsible for the finance-related audits at KPMG. He serves as the Chairman of the Audit Committee, as well as a Board Member and Audit Committee member of Khula Enterprise Finance Ltd.

AYANDA MJEKULA recently elected to take early retirement from Standard Bank of South Africa, where he was Director in its Africa operations with 20 years experience in corporate finance, credit, retail operations and public sector banking. He was

also in the automotive industry for a number of years and was awarded a fellowship by Ford Motor Company to read for his MBA. He holds an MBA from Western Michigan University, USA, and a BA degree from the University Fort Hare (UFH).

In 1989, he was the recipient of the Kellogg’s/BMF “Excellence in Achievement” award, in recognition of his outstanding achievement in the field of management and his contribution to the South African business community.

He is the Chairperson of the South African Committee of the World Petroleum Council (WPC) and serves on the executive of the international parent organisation. He is the immediate past Chairperson of the Central Energy Fund (Pty) Ltd (CEF), responsible for holding the oil and gas interests of the South African government. He has also served on the boards of PetroSA Limited; Petroleum Agency of South Africa (Chairman); Inframax Holdings (Pty) Ltd and Newhco Housing.

Mjekula serves as Chairman of the National Arts Festival (Grahamstown), as well as Chairman of both the UFH Foundation and its Finance Sub-committee, and on the Council of UFH.

ANEEL KUMAR RADHAKRISHNA is the Chief Operating Officer for the Eastern Cape Development Corporation (ECDC). Prior to that he was the Director of Corporate Services and the Director of Strategic Support (Finance) for the City of Cape Town.

He holds a BComm Degree and an MBA from the University of Durban Westville (UDW), as well as AIMFO for Local Government at UNISA. He served as a Board Member in the following entities: Associate General Accountant (South African Institute of Chartered Accountants) in 2000 and an Associate of the Institute of Municipal Financial Officers in 1990. His achievements include the Distinguished Alumni Award (UDW); designated mentor to disadvantaged individuals (Mentorship); Founding Member and Treasurer (Riverdene Hindu Dharma Sabha); Founding Member and Treasurer (Riverdene Residents Association) and Chairman of the Parlock Civic Association.

THE BOARD OF DIRECTORSAND SUB-COMMITTEESThe Board of Directors comprises executive and non-executive directors. The non-executive directors have a wide range of skills and significant commercial and other interests that enable them to bring independent judgement to the Board’s deliberations and decisions.

The roles of Chairperson and Chief Executive Officer do not vest in the same person. The chairperson is a non-executive director. The board and its sub-committees meet at least four times a year, and more frequently if necessary. Decisions on material matters are in the hands of the Board.

Company Secretary & professional advice

All Directors have access to the services of the Company Secretary, who is responsible for ensuring that Board procedures are followed. All Directors are entitled to seek independent professional advice about the affairs of the Company at the Company’s expense.

Audit & Finance Sub-committee

The Audit and Finance Sub-committee is chaired by an independent chartered accountant who is neither a member of the CDC management nor the Board of Directors. Other members are the three non-executive directors and an external independent member. The committee is attended by the Chief Executive Officer and the Chief Financial Officer.

The Audit & Finance Sub-committee functions under the powers and authority delegated to it by the Board to:

Review and recommend internal audits;

Review the draft annual financial statements;

Agree the scope and ensure the independence of the statutory auditors;

Monitor internal control systems;

Monitor compliance with the Code of Corporate Governance and the Company’s Code of Ethics;

Monitor the process of risk management.

Human Resources Sub-committee

The Human Resources Sub-committee is comprised of four non-executive directors.

The Human Resources Sub-committee’s specific terms of reference include direct authority for, or consideration of, and recommendation to the Board on matters relating to, inter alia, general staff policy, remuneration, bonuses, Directors’ remuneration and fees, service contracts and other benefits.

Investment Promotion Sub-committee

The Investment Promotion Sub-Committee is fully mandated by the Board. Its terms of reference are:

To review the CDC’s investment policy.

To ensure compliance with the adopted framework, through which investments can be monitored.

To ensure that a justifiable process, is aligned to the strategy, is followed.

It is composed of five members, three of whom are independent non-director members and two non-executive directors.


Indian High Commissioner visit

The Board is responsible for the preparation, integrity and fair presentation of the financial statements for the year ended 31 March 2007. The financial statements have been prepared on a going concern basis, in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of South Africa. The Directors also prepared the other information included in the annual report, and are also responsible for both its accuracy and its consistency with the financial statements.

Management has been delegated with the responsibility of implementing systems of internal control and maintaining accounting and information systems. These systems are designed to provide reasonable assurance as to the reliability of the financial statements, safeguarding of assets, execution and recording of transactions in accordance with generally accepted business practices and procedures and that the risks of error, fraud and loss are minimized in a cost-effective manner.

The going concern basis has been adopted in preparing the financial statements. The Directors have no reason to believe that the Company will not be a going concern in the foreseeable future, based on forecasts and available funding resources. These financial statements support the future viability of the Company.

The external auditors are responsible for auditing and reporting on the financial statements in the course of executing their statutory duties. Their report to the Company is set out on page 39.

The financial statements, set out on pages 38 to 58, were approved by the Board on 13 September 2007 and are signed on its behalf:

Moses M NgoashengChairperson

STATEMENT OF RESPONSIBILITY OF THE BOARD OF DIRECTORS

31

Left: The packaging lines rolling at Dynamic Commodities.

ATTENDANCE SCHEDULE OF BOARD& SUB-COMMITTEE MEETINGS

2006 2007Apr May Jun July Aug Sep Oct Nov Dec Jan Feb Mar

BOARD MEETING ATTENDANCEDATE 04 08 07 19 09 30 26MM Ngoasheng (Chair) P P P P P P PMP Silinga (Executive) P P P P PPP Jourdan P P P PMM Kwenaite P P P P PLW Maasdorp P PR Mopp PM Matshamba PS Nondwangu P P PLV October P PJ de Bruyn P P P P P P PK Roelofse (proxy) PB Gasa (Acting CEO) P

AUDIT AND FINANCE SUB-COMMITTEE MEETING ATTENDANCEDATE 26 17 26 15X Ncame (Chair) P P P PA Mjekula P PLV OctoberA Radhakrishna P P P PL Maasdorp P PMP Silinga (Attendee) P P PDr P Jourdan P

INVESTMENT PROMOTION SUB-COMMITTEE MEETING ATTENDANCEDATE 18PP Jourdan (Chair) PMM NgoashengM KwenaiteBS Rayner PG van Wyk PMP Silinga (Attendee) PR Mopp P

HUMAN RESOURCES SUB-COMMITTEE MEETING ATTENDANCEDATE 09J de Bruyn (Chair) PPP Jourdan PMM Ngoasheng PS NondwanguMP Silinga (Attendee) P


Nelson Mandela Bay Municipality Executive Mayor, Nondumiso Maphazi, and Pepi Silinga, CEO CDC.

33

PROFILES – CDC EXECUTIVE MANAGERS

Namawabo (Wabo) Msizi(Executive Manager:Corporate Services)

Msizi holds a BJuris. (University of Fort Hare); a LLB (Wits University); LLM Commercial Law (University of Cape Town); an Advanced Diploma in Labour Law (Rand Afrikaans Universiteit - RAU); a

Graduate Diploma in Company Direction (Graduate Institute of Management & Technology – GIMT) and a Certificate in Senior Executive Development from both Harvard and Wits Universities.

She is an attorney of the High Court and has more than ten years experience in commercial law, litigation and legal drafting. Msizi was a member of the legal teams that drafted the Constitution of the Republic of South Africa. She also serves on the South African Diamond Board and is a non–Executive Director of Khula Finance Enterprise Ltd.Rustum Mohamed (Executive

Manager: Enterprise Development)

Mohamed holds an Honours Level Diploma in Social Science (University of Cape Town). He has 13 years experience in investment and trade promotion, focusing on Foreign Direct Investment.

He was part of a core group, tasked by the South African government, to establish the first national investment promotion agency called Investment South Africa. Rustum was on the core team responsible for co-ordinating the President’s International Investment Council, Brand South Africa Campaign and the launch of the International Marketing Council of South Africa. Mohamed played a prominent role in the establishment and launch of the Automotive Industry Development Centre (AIDC) in the Eastern Cape, as well as other initiatives including the campaign to again grow cotton in the Eastern Cape. He currently sits on the Mayoral Investment Council of the Nelson Mandela Bay Municipality.

Alan Young (Chief Financial Officer)

Young, who qualified in 1981, is registered as a Chartered Accountant with the South African Institute of Chartered Accountants. He also holds a BSc., majoring in Chemistry, and a CTA from the University of Cape Town.

He has served on various governance structures. Namely on the Board of Directors of Midas Limited, representing General Motors; Chairman of St George’s Preparatory School Council and Chairman of the Hill Presbyterian Church Board.

Young has had many years in industry, as Managing Director of both a Plastic Injection Moulding and a Property Leasing company, as well as an Executive Manager at General Motors South Africa.

Among other things, Young also participated in the South African President’s Foresight Project, through the Department of Arts, Science and Technology during 1999 and 2000.

Mninawe (Pepi) Silinga(Chief Executive Officer)

Silinga is a professionally registered Civil Engineer (Pr. Eng), Project Manager (PMP) and Chartered Director (Cir. Dir.).

He is a member of various professional associations, namely

South African Institute of Civil Engineers (SAICE), Engineering Council of South Africa (ECSA), Institute of Directors (IOD − UK & SA Chapter), Project Management Institute (PMI) and elected as a fellow of the South African Academy of Engineers (SAAE).

He holds a Bsc. Eng.( KwaZulu Natal), M. Eng. (Wits) and MBA (Heriot-Watt University, Edinburgh, UK). He successfully completed various management and executive development programmes with Unisa (MDP), Stellenbosch (CMP), Oxford and INSEAD (AMP).

He has extensive experience in corporate governance responsibilities of Boards, having served on various public sector boards in different capacities including being the outgoing chairman of the Construction Industry Development Board (CIDB).

Currently, he is the Chief Executive of the Coega Development Corporation, which is the principal driver of the Coega Project.

Dr Mpumi Mabula (Executive Manager: CDC Services)

Dr Mabula is a registered Professional Engineer with a BSc., MSc. and PhD in Civil Engineering from Wits University. He also holds an Executive MBA (Graduate School of Business, University of Cape Town); Certificate in Construction Management Programme (University of Stellenbosch); Graduate Diplomas in Company Direction (Graduate Institute of Management & Technology – GIMT) and Management Advancement Programme (Wits University).


Bridgette Gasa(Executive Manager: Infrastructure Development)

Gasa holds a Bachelor of Building Arts in Architecture (University of Port Elizabeth); Cum Laude Post-graduate Diploma in Project Management from the Training for Management College (Newport University); Certificate in Project Management in the Public Sector (University of Stellenbosch); Masters in Project Management (University of Natal); and a Construction Management Programme qualification (University of Stellenbosch).

She is currently studying towards her PhD in Project Management. Gasa is affiliated to many well-known professional associations, which include the Chartered Institute of Building (Africa Region) as its junior Vice-President, Project Management South Africa, and holds board membership of the South African Rail Commuters Corporation.

Gasa previously also held board membership of the Project Management Chamber of the Services SETA, and sat on the advisory committees of Road Infrastructure Research, with the then Transportek Division of the CSIR, and the Building Science Department of Tshwane University of Technology.

Themba Koza(Executive Manager: Safety, Health Environment and Quality)

Koza is a Chemical Engineering graduate from the Cape Technikon, and has ten years experience in the safety, health and environmental fields. He has completed a MSc. in Environmental Biotechnology at Rhodes University; Management

Advancement Programme (Wits University); and an Advance Diploma in Sustainable Development (Cambridge University).

Koza has also completed a number of environmental short courses, which include Environmental Management ISO 14001, Environmental Law, Water Quality Management, Waste Management, Environmental Rehabilitation of disturbed areas and Environmental Risk Assessment (Potchefstroom University). In addition, he has completed the Integrated Environmental Management course offered by the University of Cape Town.

He is currently doing his second year of an Executive MBA with University of Cape Town.

Khwezi Tiya (Executive Manager: Zone Operations)

Tiya is a registered Professional Engineer (Pr.Eng), with the Engineering Council of South Africa (ECSA) and the Project Management Institute (PMP). He holds a BSc. Civil Engineering (University of Natal) with special awards; an MBA (Nyenrode Business Universiteit, Netherlands); a MSc. Financial Management (SOAS, University of London, UK), awarded with Merit; and a Certificate in Investment Analysis and Portfolio Management (UNISA), awarded with Distinction.

For further management development, Tiya has completed a Graduate Diploma in Company Direction (Graduate Institute of Management & Technology – GIMT); Business and the

Zuko Mapoma (Executive Manager: Human Capital Solutions)

Mapoma is an attorney of the High Court, with extensive experience in various fields of law. He holds B Proc (University of Transkei), LLB (University of the Western Cape), LLM in Corporate Law (University of South Africa), and MBA in Executive Programme (University of Cape Town).

His management training includes a Management Advancement Programme from Wits University; a Graduate Diploma in Company Direction from the Graduate Institute of Management and Technology (GIMT); and an Advanced Diploma in Labour Law from the Rand Afrikaans University.

Prior to joining the CDC, Zuko served in South Africa’s Truth and Reconciliation Commission as a Legal Advisor, a Leader of Evidence and a Member of the Executive Management. He has more than 10 years experience as a manager and legal practitioner.

Dr Peter Inman(Executive Manager: Metals Unit)

Dr Inman holds a BSc. Honours (University of London, UK) in Civil Engineering and a Doctorate of Philosophy (University of Bradford, UK) for Pre-stressed Concrete Research. He was awarded the Miller Prize (session 1966/7) of the Institution of Civil Engineers

(UK) and is a Fellow of that institution and a Registered European Engineer (FEANI). He co-authored paper (no. 7520) in the Proceedings of the Institution of Civil Engineers (Part 1 – Research and Theory) “Structural Behaviour of Jointed Pre-stressed Concrete Beams”.

He is a member of the South African Council for the Project and Construction Management professions. His experience encompasses marine works, defense related projects, process plants, oil and gas projects, infrastructure works and building projects, gained over 25 years he spent in the Middle East.

Environment Programme (University of Cambridge, UK); and the Advanced Management Programme (The Wharton School, University of Pennsylvania, USA).

He has experience and interest in Project Management, Corporate Strategy, Technology Management, Finance and Political Economy, and is currently serving on a number of Boards in a non-executive capacity.

PROFILES – CDC EXECUTIVE MANAGERS / CONTINUED

Risk Management

The board is accountable for the process of risk management and the system of internal control, and for this reason has continued to devote considerable efforts to ensuring the practice of responsible, proactive and sound risk management.

There is a formally defined risk management policy and strategy in place, designed to ensure that risk management practices are maintained at best practice levels.

There is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company that has been in place for the year under review.

There is an adequate system of internal control in place to mitigate significant risks faced by the Company to an acceptable level. Such a system is designed to manage, rather than eliminate, the risk of failure or maximise opportunities to achieve business objectives.

Internal Audit

The board recognises the need to oversee internal controls within the organisation.

In accordance with the approved internal audit charter, Internal Audit reviews the systems and management controls to determine the effectiveness of the process around:

safeguarding of assets;

integrity and reliability of financial and operational information;

compliance with legislation;

the adequacy of the risk management and internal control process.

RISK MANAGEMENT AND INTERNAL CONTROLS

The board is accountable for the process of risk management and the system of internal control, and for this reason has continued to devote considerable efforts to ensuring the practice of responsible, proactive and sound risk management.

35

Aerial view of the Coega IDZ zones.

Left: The multi-tenant CDC Head Office under construction in the Coega IDZ.

CERTIFICATE BYCOMPANY SECRETARY

For the year ended 31 March 2007

Declaration by the Company Secretary in terms of Section 268G (D) of the Companies Act.

The Company has lodged with the Registrar all such returns as are required of a private company in terms of the Companies Act, and all such returns are true, correct and up to date.

Miranda PangoActing Company Secretary13 September 2007


Ray Holmes (Operations Director, Dynamic Commodities) and

production staff with packaged product coming off the line.

37

The Audit and Finance Sub-committee has adopted formal terms of reference, which have been approved by the Board and has satisfied its responsibilities as set out in the terms of reference.

In performing its responsibilities the Audit and Finance Sub-committee has reviewed the following:

the functioning of the internal control system; the functioning of the internal audit department; the risk areas of the entity’s operations to be covered in the scope of the internal and external

audits; the accounting or auditing concerns identified as a result of the internal or external audits; the entity’s compliance with legal and regulatory provisions; the credibility, independence and objectivity of the external auditors as well as their audit reports.

The Audit and Finance Sub-committee is satisfied that internal controls and systems have been put in place, and that these controls have functioned effectively during the period under review. The Audit and Finance Sub-committee considers the Company’s internal controls and systems appropriate in all material respects to: Reduce the Company’s risks to an acceptable level; Meet the business objectives of the Company; Ensure the Company’s assets are adequately safeguarded; Ensure that the transactions undertaken are recorded in the Company’s records.

The Audit and Finance Sub-committee has evaluated the annual financial statements of the Coega Development Corporation (Proprietary) Limited for the year ended 31 March 2007 and concluded that they comply, in all material respects, with the requirements of the Companies Act (Act 61 of 1973, as amended) and International Financial Reporting Standards. The Audit and Finance Sub-committee agrees that the adoption of the going concern premise is appropriate in preparing the annual financial statements. The Audit and Finance Sub-committee has therefore recommended the adoption of the annual financial statements by the Board of Directors at their meeting on 13 September 2007.

Xolile NcameChairperson CDC Audit and Finance Sub-committee

REPORT OF THE AUDITAND FINANCE SUB-COMMITTEE

Road construction and infrastructure infill in Zone 1 South (Logistics and Light Manufacturing) in the Coega IDZ.

FINANCIALSTATEMENTS


39

Report on the Financial StatementsWe have audited the accompanying financial statements of Coega Development Corporation (Pty) Limited, which comprise the balance sheet as of 31 March 2007 and the income statement, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes as set out on pages 40 to 58.

Directors’ Responsibility for the Financial StatementsThe Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, the requirements of the South African Companies Act and in the manner required by the Public Finance Management Act, 1999 as amended. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing read with General Notice 645 and 646 of 2007, issued in the Government Gazette no 29919 of 25 May 2007. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. 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 financial statements.

The audit was also planned and performed to obtain reasonable assurance that our duties in terms of section 60 and 61 of the Public Finance Management Act, 1999, as amended have been complied with.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the accompanying financial statements present fairly, in all material respects the financial position of Coega Development Corporation (Pty) Limited as of 31 March 2007, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, the requirements of the South African Companies Act 1973, The transactions of the company that have come to our attention during the course of the audit were in all material aspects in accordance with the mandatory functions of Coega Development Corporation (Pty) Ltd, as determined by law or otherwise, in terms of section 61(1) of the Public Finance Management Act, 1999.

Without qualifying the audit opinion, attention is drawn to the following matters:

Going concernWe draw attention to the Directors’ Report, where the directors have addressed the position regarding funding for the infrastructure requirements of the company. This situation remains unresolved indicating the existence of a material uncertainty, which may cast doubt about the company’s ability to continue as a going concern.

Financial statement presentationWe draw attention to the fact that the company has not prepared consolidated financial statements. We concur with the Directors’ decision, as stated in the Directors’ Report, not to consolidate Rapid Infrastructure Development Agency (Pty) Ltd (RIDA) as the company is dormant and has never traded.

PricewaterhouseCoopers IncDirector: Sakhile MasukuRegistered Auditor 28 September 2007Johannesburg

INDEPENDENT AUDITOR’S REPORTTo the Minister of Department of Trade and Industry and Eastern Cape Development Corporation

(Left to right) Tshediso Matona (Director-General DTI), Mandisi Mpahlwa (Minister Trade and Industry) and Michel Jacques (Senior Vice President, Alcan Inc. and incoming President and CEO Alcan Primary Metals) celebrate the signing of the Coega Aliminium Smelter agreement.

DIRECTORS’ REPORTfor the year ended 31 March 2007

The directors present their annual report, which forms part of the audited financial statements of the company for the year ended 31 March 2007.

General Review

The financial statements on pages 42 to 58 set out fully the financial position, the results of operations and the cash flows of the company for the year ended 31 March 2007.

During the year under review, the company continued to extend the infrastructure of the Coega Industrial Development Zone and develop systems to service investors.

No dividends were declared or recommended.

Legal Framework and Compliance

The Coega IDZ was designated by Government Gazette on 1 December 2001.

The CDC has complied with all the laws of the country as well as with all relevant legislation.

Property, Plant and Equipment

Property, plant and equipment increased during the year, due mainly to the effect of new infrastructure and top structures amounting to R283 million. This includes the cost of incomplete projects for the provision of access roads and utilities. These projects may include costs to be written off, but these will only be identified once the projects in question are completed.

Investment property

A fair value gain of R9,3 million was effected during the year (2006 gain of R9 million), to recognise the change in value of the Company’s investment properties.

Rapid Infrastructure DevelopmentAgency (Pty) Ltd

The Rapid Infrastructure Development Agency (Pty) Ltd (RIDA) is a wholly-owned subsidiary of the CDC. Activities performed by a division of the CDC in the name of RIDA ceased on 31 March 2006. Since that date, the division in question has undertaken certain minor completion work.

Mr P Silinga is the sole director of RIDA. This company is presently dormant and hence is not consolidated with the results of the CDC.

Funding

All funding for the year under review was provided by the Department of Trade and Industry (dti). Funds received totalled R256 million (2006 – R326 million, including funding from Provincial Treasury of R158 million), including R37 million received from the dti Critical Infrastructure Programme (2006 – R25 million).

In responding to investor specific requirements, the company has commited to expenditure in the 2007/8 year in excess of the current funding allocation. The Directors are negotiating with Government agencies for additional funding to meet the infrastructural requirements of new investors in the Zone. The dti has noted the financial challenges faced by the CDC, and are working with National Treasury and other relevant stakeholders to secure the neccessary funding. They have submitted a request for additional funding through the process of the Budget Adjustments Estimate to be tabled by the Minister of Finance. However, at the date of these financial statements, these negotiations are not yet complete. In the event of a delay in the transfer of additional funds, it will be necessary to negotiate delays in the delivery of infrastructure projects and constrain company activity in order to limit expenditure of the funds available.


Lionel Billings (CDC) is flanked by dti representatives during a site tour of the Coega IDZ.

The financial statements are 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 will occur in the ordinary course of business. The ability of the company to continue as a going concern depends on the ability of the company to obtain continued support from government agencies.

Multi-year Budgeting

Based on a multi-year expenditure framework, the CDC continues to maintain the detailed financial plans required to ensure that the key elements of the project are fully delivered.

Share Capital

During the year under review, the authorised share capital of the Company remained unchanged, the A class share issued in March 2005, previously shown under Other Payables, is now correctly shown under issued share capital. The A class share conferred majority voting control onto the Department of Trade and Industry, which thereby became the Executive Authority in terms of the Public Finance Management Act.

Post Balance Sheet Events

No matter which is material to the financial affairs of the company has occurred between 31 March 2007 and the date of approval of the financial statements.

Directors and Secretary

Details of the directors and company secretary are included on page 26. Since the date of the last Annual Report, the following changes occurred:

Changes after March 2007

Mr MD Matshamba was appointed as director on 26 March 2007.

Ms MN Pango replaced Ms NT Mayosi as Acting Company Secretary on 26 March 2007.

The chief executive director, Mr P Silinga, is contracted to the company until July 2012.

Auditors

PricewaterhouseCoopers Inc continue to act as the Company’s auditors in accordance with Section 270(2) of the Companies Act.

Moses M Ngoasheng Pepi SilingaChairman Chief Executive Officer13 September 2007 13 September 2007

41

(Left to right) His Excellency Philip Green OAM (Australian High Commissioner to South Africa) and Vuyelwa Qinga-Vika (Marketing and Communications, CDC) confer during an Australian Trade Delegation visit to the Coega IDZ.

2007 2006

Notes R’000 R’000

ASSETSNon-current assets 835,205 431,197

Property, plant and equipment 2 659,864 341,000

Investment property 3 175,341 90,197

Current assets 103,729 414,168

Trade and other receivables 4 62,588 42,933

Cash and cash equivalents 5 41,141 371,235

Total assets 938,934 845,365

EQUITY Equity 507,958 612,432

Share capital 6 7 7

Share premium 6 1,264,551 1,264,551

Accumulated loss (756,600 ) (652,126 )

LIABILITIESNon-current liabilities

Deferred income 7 350,611 157,065

Current liabilities

Trade and other payables 8 80,365 75,868

Total liabilities 430,976 232,933

Total equity and liabilities 938,934 845,365

BALANCE SHEET as at 31 March 2007

The notes on pages 46 to 58 are an integral part of these financial statements


100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

900 000

10 00 000

02007 2006

Non-current assetsCurrent assets

Contributed equity

200 000

400 000

600 000

800 000

0

10 00 000

2007 2006

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

900 000

10 00 000

02007 2006

Non-current liabilitiesCurrent liabilities

2007 2006


REVENUE 96,905 87,063

Interest received 15,119 26,457

Rental received 14,680 8,966

Management fees 4,277 6,004

Government grants released to income 7 62,829 45,636

Fair value gains 3 9,334 8,995

Other income 10,900 1,702

117,139 97,760

EXPENDITURE 221,613 142,860

Administrative expenses 25,928 16,291

Direct contract costs 105,883 65,849

Operating expenses 89,802 60,720

Loss for the year 9 (104,474 ) (45,100 )

INCOME STATEMENTfor the year ended 31 March 2007

The notes on pages 46 to 58 are an integral part of these financial statements

43

100 000

200 000

300 000

02007 2006

Revenue

100 000

200 000

300 000

02007 2006

Expenditure

400 000

500 000

100 000

200 000

300 000

02007 2006

Loss

400 000

2007 2006


CASH FLOWS FROM OPERATING ACTIVITIESCash receipts from customers 5,526 9,660

Cash paid to contractors and employees (196,467 ) (92,647 )

Cash utilised by operations 14 (190,941 ) (82,987 )

Interest received 15,119 26,457

Net cash outflows from operating activities (175,822 ) (56,530 )

CASH FLOWS FROM INVESTING ACTIVITIESAdditions to property, plant and equipment 2 (334,837 ) (234,109 )

Additions to investment property 3 (75,810 ) (21,459 )

Net cash outflows from investing activities (410,647 ) (255,568 )

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of shares 6 - 143,890

Government grants received 7 256,375 182,898

Net cash inflows from financing activities 256,375 326,788

Net (decrease)/increase in cash and cash equivalents (330,094 ) 14,690

Cash and cash equivalents at beginning of year 371,235 356,545

Cash and cash equivalents at end of year 5 41,141 371,235

CASH FLOW STATEMENTfor the year ended 31 March 2007


Share Capital Share Premium Accumulated Loss Total

R’000 R’000 R’000 R’000

Balance at 31 March 2005 6 1,120,662 (607,026) 513,642

Shares issued 1 143,889 - 143,890

Loss for the period (45,100) (45,100 )

Balance at 31 March 2006 7 1,264,551 (652,126) 612,432

Loss for the period (104,474) (104,474 )

Balance at 31 March 2007 7 1,264,551 (756,600) 507,958

STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2007

45

Avanti Call site visit

NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2007

1. ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below and are consistent with those applied in the previous year: 1.01 Basis of preparationThe financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and the interpretation issued by the International Financial Reporting Interpretation Committee (IFRIC). The financial statements have been prepared under the historical cost convention as modified by the revaluation of investment property, which are carried at fair value. Standards, amendments and interpretations effective in 2007, but not relevant.

The following standards, amendments and interpretations are mandatory for accounting periods beginning on or after 1 January 2006, but were not relevant to the company’s operations:

IAS 19 (amendment) - Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosures;

IAS 21 (amendment) - The Effects of changes in Foreign Exchange Rates - Net Investment in a Foreign Operation;

IAS 39 (amendment) - Financial Instruments: Recognition and Measurement - Cash Flow Hedge Accounting of Forecast Intragroup Transactions;

IAS 39 and IFRS 4 (amendment) - Financial Guarantee Contracts;

IFRS 6 - Exploration for and Evaluation of Mineral Resources;

IFRIC 5 - Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds;

IFRIC 6 - Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment; and

IFRIC 7 - Applying the restatement approach under IAS 29 Financial Reporting in Hyperinflationary Economies.

Standards and interpretations to existing standards that are not yet effective.

The following interpretations to existing standards have been published that are mandatory for the Company’s accounting periods beginning on or after 1 April 2007 that the Company has not adopted early: IFRS 7, Financial Instruments; Disclosures, and a

complementary amendment to IAS 1, Presentation of Financial Statements; Capital disclosures (effective from 1 January 2007). IFRS 7 introduces new qualitative and quantitative disclosures to improve the information about financial instruments. The Company has assessed the impact of IFRS 7 and the amendment to IAS 1 and has concluded that the main additional disclosures will be the sensitivity analysis to market risk, additional credit risk and liquidity risk disclosures and the capital disclosures required by the amendment to IAS 1. The Company will apply IFRS 7 and the amendment to IAS 1 from 1 April 2007.

IFRIC 8 - Scope of IFRS 2 (effective for annual periods beginning on and after 1 May 2006). IFRIC 8 requires consideration of transactions involving the issuance of equity instruments - where identifiable consideration received is less than the fair value of the equity instruments issued - to establish whether or not they fall within the scope of IFRS 2. The Company will apply this IFRIC from 1 April 2007 but it is not expected to impact on the Company’s accounts;

IFRIC 10 - Interim Financial Reporting and Impairment (effective for annual periods beginning on or after 1 November 2006). IFRIC 10 prohibits impairment losses recognised in an interim period on goodwill, investments in equity instruments and investments in financial assets carried at cost to be reversed at a subsequent balance sheet date. The Company will


47

apply this IFRIC from 1 April 2007 but it is not expected to have an impact on the Company’s accounts.

IFRIC 11 - Group and Treasury Share Transactions (effective for annual periods beginning on or after 1 March 2007). IFRIC 11 requires share-based payment transactions in which an entity receives services as consideration for its own equity instruments to be accounted for as equity-settled. Where a parent grants rights to its equity instruments to the employees of its subsidiary, this transaction is required to be accounted for as equity settled by the subsidiary, provided that the share-based arrangement is accounted for as equity-settled in the consolidated financial statements of the parent. If a subsidiary grants rights to equity instruments of its parent to its employees IFRIC 11 requires the subsidiary to account for the transaction with its employees as cash-settled. The Company will apply IFRIC 11 from 1 April 2007, but it is not expected to have any impact on the company’s accounts.

c) Standards and interpretations to existing standards that are not yet effective and not relevant to the CompanyThe following standards and interpretations to existing standards have been published that are mandatory for accounting periods beginning on or after 1 January 2007, but are not relevant to the Company’s operations: IFRS 8 - Operating segments; IFRIC 9 - Reassessment of Embedded Derivatives; IFRIC 12 - Service Concession Arrangements and AC 503 - Accounting for Black Economic

Empowerment (BEE) transactions. 1.02 Critical estimates and judgmentsThe preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates.

Estimates and judgment are continually evaluated and are based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. The Company applies judgment and makes estimates in respect of the following significant areas: Capitalisation of infrastructure costsManagement applies judgment in assessing whether infrastructure will be controlled by the Company and whether future economic benefits are expected to flow to the Company in determining whether costs incurred on infrastructure should be capitalised as assets.

Useful lives of infrastructureManagement determines the estimated useful lives and related depreciation charges for its infrastructure components. These estimates are based on management’s experience, knowledge and current expectations. The annual depreciation charge will be adjusted for any changes in these estimates.

Impairment of capitalised infrastructureManagement applies judgment in assessing whether capitalised infrastructure needs to be impaired. Capitalised infrastructure is impaired when the future economic benefits that are expected to flow to the Company are negatively affected by changes in circumstances. 1.03 Property, plant and equipment Buildings, infrastructure, vehicles, equipment and furniture and fittings are stated at historical cost less depreciation. Cost includes all costs directly attributable to bringing the assets to working condition for their intended use. Infrastructural expenditure, where there is no expected future economic benefit is written off in the year the expenditure is incurred. Capitalised infrastructural expenditure will be depreciated over its estimated useful life from the construction handover date.


Land is stated at cost and not depreciated as it is deemed to have an indefinite life.

Included under land and buildings are land improvements which mainly comprise electricity, water, sewerage and roads within the IDZ.

Acquired computer software is capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. DepreciationDepreciation is calculated on the straight-line method to write off the cost of assets to their residual values over their estimated useful lives, except for assets costing R5 000 or less, which are written off in the year of acquisition. The estimated useful lives of the main asset categories are as follows: Buildings 25 yearsRoads 25 yearsWater and sewers 30 yearsElectrical equipment 25 yearsMotor vehicles 5 yearsEquipment and software 2-6 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised with other (losses)/gains - net, in the income statement.

1.04 Impairment of assetsAssets that have an indefinite useful life, for example land, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

Non-financial assets other than goodwill that previously suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. If the recoverable amount of a previously impaired asset is determined to have been increased, then the carrying amount of that asset is increased to its recoverable amount. This increase is called a “reversal of an impairment loss”, which is accounted for as income.

1.05 Investment propertyInvestment property, principally comprising of the construction village, commercial centre and tenant buildings in progress, is held for long-term rental yields and is not occupied by the Company. Investment property is carried at fair value, representing market value determined periodically by the external valuers. Changes in fair values are recorded in the income statement.

1.06 Leases Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease. 1.07 Research and development costs Research costs and development costs are recognised as an expense as incurred. 1.08 Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the

49

effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the company will not be able to collect all amounts due to it according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of the loss is recognised in the income statement. When a trade receivable is uncollectible, it is written off against the provision for trade receivables.

Subsequent recoveries of amounts previously written off are credited in the income statement. 1.09 Cash and cash equivalentsCash and cash equivalents includes cash on hand, deposits held on call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown as current liabilities on the balance sheet. 1.10 Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the company will comply with all attached conditions. Government grants relating to costs are deferred and released to the income statement over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the acquisition of assets are included in non-current liabilities as deferred income and are credited to the income statement on a straight line basis over the expected lives of the related assets.

Grants not specifically related to assets or costs are applied first to assets and then to costs and are recognised as set out above.

1.11 Trade payablesTrade payables are carried at the fair value of the consideration to be paid in future for goods or services that have been received or supplied and invoiced or formally agreed with the supplier.

1.12 ProvisionsProvisions for environmental restoration, restructuring costs and legal claims are recognised when: the company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. 1.13 Contingent liabilitiesContingent liabilities are possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. 1.14 Revenue recognitionRevenue comprises government grants, interest income, rental income and income from project management services. Revenue is shown net of value added tax. The company recognises revenue when the amount of revenue can be reliably measured, it is probable that the future economic benefits will flow to the entity and specific criteria have been met for each of the activities described below.

a) Government grants (refer note 1.10)

b) Interest income Interest income is recognised on a time-proportioned

basis using the effective interest method.


c) Rental income Rental income is recognised on a straight-line basis

over the period of the rental agreement.

d) Project management services Revenue from the provision of project management

services is recognised in the period in which the services have been rendered.

1.15 Deferred income taxesDeferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary difference can be utilised. 1.16 Employee benefits(a) Leave

Employee entitlements to annual leave are recognised when they accrue to the employees. An accrual is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

(b) Retirement

The Company operates a defined contribution provident plan for all employees. The Company has no legal or constructive obligation to pay further contributions beyond those already paid.

(c) Medical aid The Company makes a limited contribution towards employee medical costs. The Company has no legal

or constructive obligation to pay further contributions beyond the agreed limits. The Company does not provide any medical aid benefits after retirement.

(d) Incentive bonusThe Company recognises a liability and an expense for bonuses, based on a formula that takes into consideration the performance of the individual. The Company recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

All employee benefits are recognised in the income statement when they are due. 1.17 Functional and presentation currencyItems included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”), being South African Rand (R).

1.18 Comparative figuresCertain disclosures of prior year balances have been amended as follows:

Share capital:Share capital and share premium have been separately disclosed on the face of the balance sheet. Previously they were disclosed as one amount.

Property, plant and equipment:A separate column has been added for work in progress under the property, plant and equipment note. Previously the amounts included in work in progress were included within the other categories and disclosed as a note below the table.

Land improvements, which mainly comprise electricity, water, sewerage and road infills within the IDZ have been reclassified from infrastructure to land and buildings.

Deferred revenue:The amount of the deferred revenue balance that will be released against income in the next financial year has been disclosed.

2. Property, plant and equipment

Land andbuildings

Infrastructure

Capital Workin Progress

Motor Vehicles Equipment

Furniture & Fittings Total

R’000 R’000 R’000 R’000 R’000 R’000 R’000

Year ended 31 March 2007

Opening net carrying amount 60,893 46,383 220,169 659 2,962 9,934 341,000

Additions 16,694 48 283,085 - 33,473 1,537 334,837

Disposals - - - - (35 ) - (35 )

Transfers 247,070 - (247,070 ) - - - -

Depreciation (5,379 ) (1,935 ) - (211 ) (5,080 ) (3,333 ) (15,938 )

Closing net carrying amount 319,278 44,496 256,184 448 31,320 8,138 659,864

At 31 March 2007

Cost, net of impairment losses 326,415 48,364 256,184 1,202 46,411 17,422 695,998

Accumulated Depreciation (7,137 ) (3,868 ) - (754 ) (15,091 ) (9,284 ) (36,134 )

Net carrying amount 319,278 44,496 256,184 448 31,320 8,138 659,864

Associated deferred income from Government grants (Refer note 7) 329,219 14,890 6,502 - - - 350,611

The register of land and buildings is open for inspection at the registered office of the company.

Land and Buildings

Infrastructure

Capital Work in Progress

Motor Vehicles Equipment

Furniture & Fittings Total

R’000 R’000 R’000 R’000 R’000 R’000 R’000

Year ended 31 March 2006

Opening net carrying amount 49,114 48,307 2,563 605 5,405 9,376 115,370

Additions 12,208 9 217,606 257 909 3,120 234,109

Disposals - - - - (43 ) - (43 )

Depreciation (429 ) (1,933 ) - (203 ) (3,309 ) (2,562 ) (8,436 )

Closing net carrying amount 60,893 46,383 220,169 659 2,962 9,934 341,000

At 31 March 2006

Cost, net of impairment losses 62,651 48,316 220,169 1,202 12,974 15,885 361,197

Accumulated depreciation (1,758 ) (1,933 ) - (543 ) (10,012 ) (5,951 ) (20,197 )

Net carrying amount 60,893 46,383 220,169 659 2,962 9,934 341,000

Associated deferred income from Government grants(Refer note 7)

137,903 14,229 4,933 - - - 157,065

51

Aerial view of the Neptune Road System Interchange to ensure the logistical network of the Coega IDZ.

3. Investment property 2007 2006

R’000 R’000

Beginning of the year 90,197 59,743

Additions 75,810 21,459

Fair value gains 9,334 8,995

End of the year 175,341 90,197

The investment properties are valued at fair value. Fair values are determined by an independent, professionally qualified valuer on a periodic basis. During the current year, the fair value was determined by the directors by adjusting the prior year’s externally determined value by appropriate indices.

The following amounts have been recognised in the income statement:

Rental income 14,680 8,966

4. Trade and other receivables 2007 2006

R’000 R’000

Receivables-cost recoveries 32,882 27,723

SA Revenue Services – VAT 19,993 -

Other receivables 6,254 7,077

Receivables from related parties (Note 13) 3,459 8,133

62,588 42,933


6. Share capital and share premium

Number ofShares

Par ValueRands

Share Premium Rands

TotalRands

Authorised

1 000 000 ordinary shares of 1 cent each 1,000,000 10,000 - 10,000

1 “A” Class Share of R1 each 1 1 - 1

1,000,001 10,001 - 10,001

Issued

Ordinary shares

At the beginning of year 683,732 6,837 1,264,550,726 1,264,557,563

“A” Class share issued in March 2005, reallocated(see Directors’ Report) 1 1 - 1

Total share capital at the end of the year 683,733 6,838 1,264,550,726 1,264,557,564

53

5. Cash and cash equivalents 2007 2006

R’000 R’000

Cash at bank and on hand 3,617 4,395

Short term bank deposits 37,524 366,840

41,141 371,235

The effective interest rate on short term bank deposits was 8.1% (2006: 7,1%)


7. Deferred income 2007 2006

R’000 R’000

Government grants

At beginning of the year 157,065 19,803

Grants received 256,375 182,898

Released to income

- to offset costs (52,211 ) (44,887 )

- against depreciation (10,618 ) (749 )

(62,829 ) (45,636 )

At end of the year

- to be released within one year 10,618 749

- to be released beyond one year 339,993 156,316

350,611 157,065

The Company has received grants from the Department of Trade and Industry including amounts received under the “Critical Infrastructure Programme”.

8. Trade and other payables 2007 2006

R’000 R’000

Trade payables 57,285 63,938

SA Revenue Services - VAT - 9,332

Accrued Expenses 23,080 2,598

80,365 75,868

9. Net Loss for the year is arrived at after charging the following: 2007 2006

R’000 R’000

Depreciation

Annual charge – Note 2 15,938 8,436

Released from deferred income – Note 7 (10,618 ) (749 )

5,320 7,687

Fair value gains – Note 3 9,334 8,995

Repairs and maintenance 898 570

Operating lease rentals

Office buildings 1,887 1,691

Other 497 679

2,384 2,370

Auditors’ remuneration

Audit fees - current year 299 212

Prior year under provision 60 14

Other services 17 11

376 237

Salary Fees Bonus 2007 2006

R’000 R’000 R’000 R’000 R’000

Directors’ remuneration

J de Bruyn - 44 - 44 20

Dr P Jourdan (paid to Mintek) - 12 - 12 24

M M Kwenaite - 12 - 12 -

L Maasdorp - 22 - 22 18

M M Ngoasheng** - 27 - 27 18

S Nondwangu - 34 - 34 16

L October - - - - -

P Silinga*** 1,640 - 320 1,960 1,539

1,640 151 320 2,111 1,635

** Chairman of the Board *** Chief Executive Officer

55

Mandisi Mpahlwa (Minister of Trade and Industry) delivering his keynote address at the signing of the Coega Aluminium Smelter agreement.

Total Cost to Company

Salary and Bonus

Retirement Benefit Medical 2007 2006

R’000 R’000 R’000 R’000 R’000

Employee costs

Key management compensation 8,048 329 109 8,486 6,387

Other employee costs 41,332 1,830 1,012 44,174 32,627

49,380 2,159 1,121 52,660 39,014

No emoluments were paid by the subsidiary company, Rapid Infrastructure Development Agency (Pty) Ltd

Number Number

Number of persons employed by the Company at year end 142 121

10. Taxation and deferred taxation 2007 2006

R’000 R’000

The Company has an estimated assessable loss at year-end, available for set off against future taxable income, amounting to 287,014 192,561

The tax on the Company’s loss before tax differs from the theoretical amount that would arise using the basic tax rate as follows:

Loss before tax (104,474 ) (45,100 )

Tax calculated at a rate of 29% (30,297 ) (13,079 )

Income not taxable (18,220 ) (14,376 )

Expenses not deductible for tax purposes 24,073 9,745

Deferred tax asset not recognised 24,444 17,710

Tax charge - -

Deferred income taxes are calculated on all temporary differences under the liability method using a tax rate of 29%.Deferred tax assets are attributable to the following items:

Provisions and non-deductible accruals 1,554 1,382

Assessable Loss 83,234 55,843

Assets allowances (124) 273

Fair value adjustment (1,216) -

Deferred tax asset not recognised (83,448) (57,498 )

- -

The d


Total Cost to Company

11. Commitments

11.1 Contracts awarded 2007 2006

Expenditure contracted for at the balance sheet date but not yet expended is as follows:

R’000 R’000

Land and land improvements 430,573 66,848

Infrastructure 143,854 13,930

Buildings 124,576 103,806

Imbewu Project 27,480 57,000

726,483 241,584

Contracts will be funded by grants from Government programmes.

11.2 Land arbitration

The price of certain land, which has been acquired in the Coega Industrial Development Zone, is subject to arbitration.The extent of any additional commitment is not stated as the directors are not in a position to ascribe an anticipated settlement value.

11.3 Other Commitments

Due within 1 year Due within 1 year

R’000 R’000

Operating lease commitments – premises 1,571 1,250

– other 719 632

2,290 1,882

Due 2 to 5 Years Due 2 to 5 Years

R’000 R’000

Operating lease commitments – premises 428 154

– other 1,153 1,421

1,581 1,575

12. Financial risk factors

Credit risk

The Company has no significant concentration of credit risk other than in short-term cash and trade debtors. All cash is placed with reputable financial institutions. Counter-parties of the Company include the government and banking institutions. Delivery/settlement risk exists to the extent that counter-parties may not be able to deliver on contractual obligations.

Interest rate risk

The Company’s operating cash flows are dependent on changes in market interest rates.

57

Thobile Mhlahlo (Eastern Cape Safety, Liaison, Road and Transport MEC) and Dave Coffey (President, PERCCI) attending a trade delegation reception.

13. Related party transactionsThe company is jointly owned by the Department of Trade and Industry (dti) and the Eastern Cape Development Corporation (ECDC). Grants received from the dti during the year were treated as income, except where the grants were for the acquisition of assets. These grants were accounted for as set out in Note 7. There were no further transactions with related parties during the year.

2007 2006

R’000 R’000

Outstanding current debtors balances recoverable from related parties:

Eastern Cape Development Corporation 3,459 8,133

3,459 8,133

Grants received:

Department of Trade and Industry 256,375 25,005

Eastern Cape Development Corporation - 301,783

256,375 326,788

Less: Capitalised to equity - (143,890 )

256,375 182,898

Revenue / cost recoveries:

Eastern Cape Development Corporation - 6,533

Provincial Treasury 1,970 -

1,970 6,533

The co

Refer also to Note 9 regarding directors’ emoluments and key management compensation.

14. Cash utilised by operations

Reconciliation of net loss to cash utilised by operations: Note

Net loss for the year (104,474 ) (45,100 )

Adjusted for:

Depreciation 2 15,938 8,436

Fair value gain 3 (9,334 ) (8,995 )

Assets written off 2 35 43

Interest received (15,119 ) (26,457 )

Government grants released to income 7 (62,829 ) (45,636 )

Changes in working capital (15,158 ) 34,722

Increase in trade and other receivables 4 (19,655 ) (7,012 )

Increase in trade and other payables 8 4,497 41,734

(190,941 ) (82,987 )


Infrastructure infill in Zone 2 (Automotive Cluster)in the Coega IDZ.

ABE Affirmative Business EnterpriseAsgiSA Accelerated Shared Growth Initiative of South AfricaBEE Black Economic Empowerment BPO & O Business Process Outsourcing and Off-shoringCDA Core Development AreaCDC Coega Development CorporationCDC-S CDC ServicesCHCS Coega Human Capital SolutionsDEDEA Department of Economic Development and Environmental AffairsDME Department of Minerals and EnergyDOT Department of TransportDPE Department of Public EnterprisesDPW Department of Public Worksdti Department of Trade and IndustryDWAF Department of Water and ForestryECDC Eastern Cape Development CorporationEIA Environmental Impact AssessmentESKOM Electrical Supply CommissionFDI Foreign Direct InvestmentHDI Historically Disadvantaged IndividualICT Information Communication TechnologyIDC Industrial Development CorporationIDP Integrated Development PlanIDZ Industrial Development ZoneIFRIC International Financial Reporting Interpretation CommitteeIFRS International Financial Reporting StandardsIR Industrial RelationsJIPSA Joint Initiative on Priority Skills Acquisition LBMS Labour and Business Management Services MEC Member of Executive CommitteeMOU Memorandum of UnderstandingNEPAD The New Partnership for Africa’s DevelopmentPDI Previously Disadvantaged IndividualPFMA Public Finance Management ActPGDP Provincial Growth & Development PlanPSA Project Support AgreementRIDA Rapid Infrastructure Development AgencySMME Small, Medium and Micro EnterprisesTNPA Transnet National Ports Authority

Glossary

59

Coega Development Corporation (Pty) Ltd

Libra ChambersCnr Oakworth Road & Carnarvon PlaceHumerailNelson Mandela Bay (Port Elizabeth)6001

Postnet Suite No. 35Private Bag x13130Humewood Nelson Mandela Bay (Port Elizabeth)6013South Africa

CONTACT CENTRE

South AfricaTel: 08610 COEGA / 08610 26342

InternationalTel: +27 41 408 4800Fax: +27 41 408 4998

E-mail: [email protected]: www.coega.com

INDUSTRIAL DEVELOPMENT ZONEAND DEEPWATER PORT


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mailto:[email protected]

http://www.coega.com

Documents

Coega Annual Report Annual Report 2007.pdf · 2009-10-09 · Proﬁles – Audit & Finance Sub-committee 29 Board of Directors and Sub-committees 30 Statement of Responsibility of