1. Part A: General Information 3 2. Part B: Performance ... · 1. Part A: General Information. 1.1...

CONTENTS

1. Part A: General Information ..................................................................................... 3 1.1 Public entity‟s general information ..................................................................................................................................................................................... 3

1.2 List of Abbreviations /Acronyms ........................................................................................................................................................................................ 4

1.3 Strategic Overview ............................................................................................................................................................................................................. 5

1.4 Legislative Mandates ......................................................................................................................................................................................................... 6

1.5 Organisational Structure .................................................................................................................................................................................................... 7

1.6 Foreword by the Chairperson ............................................................................................................................................................................................ 8

1.7 Chief Executive Officer‟s Overview ................................................................................................................................................................................. 10

2. Part B: Performance Information .......................................................................... 14 2.1 Statement of Responsibility for Performance Information ............................................................................................................................................... 14

2.2 Overview of the Public Entity‟s Performance .................................................................................................................................................................. 15

2.3 Programme Performance ................................................................................................................................................................................................ 28

3. Part C: Report on Corporate Governance ............................................................ 44 3.1 Introduction ...................................................................................................................................................................................................................... 44

3.2 Portfolio Committees ....................................................................................................................................................................................................... 44

3.3 Executive Authority .......................................................................................................................................................................................................... 44

3.4 The Board ........................................................................................................................................................................................................................ 45

3.5 Board Charter .................................................................................................................................................................................................................. 45

3.6 Composition of the Board ................................................................................................................................................................................................ 46

3.7 Committees ...................................................................................................................................................................................................................... 47

3.8 Remuneration of Board Members ................................................................................................................................................................................... 48

3.9 Risk Management ............................................................................................................................................................................................................ 48

3.10 Internal Control ................................................................................................................................................................................................................ 50

3.11 Internal Audit and Audit Committees ............................................................................................................................................................................... 51

3.12 Compliance with Laws and Regulations .......................................................................................................................................................................... 51

3.13 Fraud and Corruption ....................................................................................................................................................................................................... 52

3.14 Minimising Conflict of Interest .......................................................................................................................................................................................... 52

3.15 Code of Conduct .............................................................................................................................................................................................................. 52

3.16 Health, Safety and Environmental Issues ....................................................................................................................................................................... 52

3.17 Social Responsibility ........................................................................................................................................................................................................ 53

3.18 Audit Committee Report .................................................................................................................................................................................................. 54

4. Part D: Human Resources ..................................................................................... 57 4.1 Value of Human Capital in the ECGBB ........................................................................................................................................................................... 57

4.2 Overview of HR Matters at the ECGBB ........................................................................................................................................................................... 57

4.3 HR Priorities for the Year Under Review and the Impact of These Priorities ................................................................................................................. 57

4.4 Workforce Planning and Key Strategies to Attract and Recruit a Skilled and Capable Workforce ................................................................................ 58

4.5 Employee Performance Management Framework .......................................................................................................................................................... 58

4.6 Employee Wellness Programmes ................................................................................................................................................................................... 58

4.7 Policy Development ......................................................................................................................................................................................................... 58

4.8 Oversight Statistics .......................................................................................................................................................................................................... 59

5. Part E: Financial Information ................................................................................. 64 5.1 Statement of Responsibility .............................................................................................................................................................................................. 64

5.2 Report of the External Auditor .......................................................................................................................................................................................... 65

5.3 Annual Financial Statements ............................................................................................................................................................................................ 67

Statement of Financial Position ....................................................................................................................................................................................... 68

Statement of Financial Performance ............................................................................................................................................................................... 69

Statement of Changes in Net Assets............................................................................................................................................................................... 70

Cash Flow Statement ...................................................................................................................................................................................................... 71

Statement of Comparison of Actual and Budget Amounts .............................................................................................................................................. 72

Accounting Policies for the year ended 31 March 2013 .................................................................................................................................................. 73

Notes to the Annual Financial Statements ...................................................................................................................................................................... 79

1

1. Part A: General Information

1.1 Public Entity’s General Information

Registered name of the public entity Eastern Cape Gambling and Betting Board

Registered Office address

ECGBB Building, Quenera Park

Quenera Drive, Beacon Bay

East London

5201

Postal Address

PO Box 15355, Beacon Bay

East London

5211

Contact telephone numbers +27 43 702 8300

Email [email protected]

Website www.ecgbb.co.za

External Auditors

Auditor-General of South Africa, Eastern Cape Province

69 Frere Road

Trust Building

Vincent

East London

5217

PO Box 13252

East London

5217

Bankers Information

Standard Bank of South Africa.

PO Box 7037

East London

5200

Company Secretary Mrs. GP Koyana – B.Proc, LLB, MBA

Legal Services and Board Secretary

3

1.2 List of Abbreviations /Acronyms

AFS Annual Financial Statement

AGSA Auditor General of South Africa

APP Annual Performance Plan

BOARD Eastern Cape Gambling and Betting Board

BM Bookmaker

BSC Balance Score Card

CAS Casino

CEO Chief Executive Officer

CFO Chief Financial Officer

CSR Corporate Social Responsibility

DEDEAT Department of Economic Development, Environmental Affairs and Tourism

ECGBB Eastern Cape Gambling and Betting Board

EME Exempted Medium Enterprises

FICA Financial Intelligence Centre Act

GGR Gross Gaming Revenue

HOD Head of Department

IDP Integrated Development Plan

IEC Information Education Communication

IT Information Technology

LOC Letter of Certification

LPMs Limited Payout Machines

MEC Member of the Executive Council

MOU Memorandum of Understanding

MSP Master Services Plan

MTEF Medium Term Expenditure Framework

MTREF Medium Term Revenue and Expenditure Framework

NGB National Gambling Board

NPA National Prosecuting Authority

NRGP National Responsible Gambling Programme

PFMA Public Finance Management Act

PGDP Provincial Growth and Development Plan

RFP Request For Proposal

RO Route Operator

SAACREG South African Advisory Council for Responsible Gambling

SAPS South African Police Service

SARS South African Receiver of Revenue

SED Socio Economic Development

SITE A Three to five machines

SITE B 20 to 40 machines

SLA Service Level Agreement

SMART Specific, Measurable, Achievable, Realistic and Time bound

TOTE Totalisator

WAN Wide Area Network

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1.3 Strategic Overview

1.3.1 Vision The Best, Most Efficient, Empowering Gaming Regulator

1.3.2 Mission To ensure the Eastern Cape Gaming Industry conducts itself honestly and competitively, with maximum contribution to

society. We are therefore committed to protecting the public interest through regulation, licensing and appropriate

enforcement. We will do this through providing excellent service to our stakeholders and through facilitating socio-

economic benefits to communities within which we operate.

1.3.3 Values

Value Behavioural Demonstration

Consultation Keeping stakeholders informed on all key issues and through endeavouring to involve all stakeholders

in decision making processes where they are affected by such decisions

Friendliness Encouraging a friendly working relationships and environments

Teamwork People working together towards achieving common goals and targets

Respect The equal treatment of staff, honesty on organisational issues and through non-disclosure of

confidential information

Service Delivery The on-time delivery of a quality and professional service to all our stakeholders

Honesty Providing open feedback to staff and stakeholders on all issues

Empowerment Providing training and development to employees, and engaging the services of and goods procuring

from BBBEE suppliers

Community Development Giving back to our communities.

1.3.4 Strategic outcomes oriented goals

Goal 1 Strategic Outcome-Oriented Goal Excellent Services to Stakeholders

Goal Statement To provide excellent services to our stakeholders.

Goal 2 Strategic Outcome-Oriented Goal International Regulatory System

Goal Statement To institutionalise an international, competitive regulatory system

Goal 3 Strategic- Outcome Oriented Goal Oversight arrangements and Socio-Economic Development

commitments

Goal Statement To establish sound institutional oversight arrangements and systems

to administer socio-economic development commitments that arise

from licence conditions

Goal 4 Strategic Outcome-Oriented Goal Performing Organisation and recognition of employees

Goal Statement To develop a high-performance value-based organisation that

recognises ECGBB employees as it‟s most important assets.

Goal 5 Strategic Outcome Oriented Goal Revenue Collection for the Provincial Treasury and Socio-Economic

Benefits.

Goal Statement To optimise revenue collection for the socio-economic benefits of

underprivileged communities.

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1.4 Legislative Mandates

1.4.1 Schedule in terms of the PFMA:

The Eastern Cape Gambling and Betting Board falls under Schedule 3, Part C of the Public Finance Management Act, No. 1 of 1999.

1.4.2 Specific Constitutional and Other Legislative, Functional and Policy Mandates

1.4.2.1 Gambling and Betting Act, 1997 (Eastern Cape) (Act No. 5 of 1997.

1.4.2.2 National Gambling Act, 2008 (Act No. 10 of 2008).

1.4.2.3 Promotion of Access to Information Act, 2000 (Act No. 2 of 2000).

1.4.2.4 Public Finance Management Act (PFMA), Act No 1 of 1999 and Treasury Regulations.

1.4.2.5 Employment Equity Act, No. 5 of 1998.

1.4.2.6 Skills Development Levies Act, No 9 of 1999.

1.4.2.7 Basic Conditions of Employment Act, No. 75 of 1997.

1.4.2.8 Treasury Framework for Strategic Plan and Annual Performance Plans.

1.4.2.9 Policy Framework for the Government-wide Monitoring and Evaluation System.

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1.5

Org

anis

atio

nal

Str

uct

ure

7

1.6 Foreword by the Chairperson

1.6.1 Introduction

The directors are required by the Public Finance Management Act (Act 1 of 1999), to

maintain adequate accounting records. As such, they are responsible for the content and

integrity of the annual financial statements and related financial information included in

this report. It is the responsibility of the directors to ensure that the annual financial

statements fairly represent the state of affairs of the entity at the end of the financial year

as well as the results of its operations and cash flows for that period.

1.6.2 Highlight achievements of the public entity

The following aspects can be identified as highlights achieved during the reporting period:

• Revenue collection of R114m as against a target of R112m.

• We have continued with our drive, informed by necessary governance imperatives, to put in place functional Governance

Structures and implement transparent systems of accountability.

• The introduction and roll-out of bingo occurred during this period.

• We continued to implement and institutionalise the ECGBB‟s Risk Management Framework, and advanced the institutionalisation

of a risk management culture.

• The Eastern Cape is the first province in the country where a route operator has reached the milestone of operating 1000 LPMs.

• A second route operator licence was issued.

• We closed a number of illegal gambling operations and seized 49 illegal machines in Lusikisiki.

• The ECGBB ran its first intensive responsible gambling campaign during September 2012.

• The grand opening of the Boardwalk Hotel and Convention Centre in Port Elizabeth was a significant milestone, as was that of the

„The Venue‟ at Hemingway‟s Hotel; and

• The ECGBB was bestowed the BBQ CSI Award acknowledging the organisation‟s contributions towards its corporate social

responsibility projects.

1.6.3 Challenges Faced by the Board

The following challenges were experienced by the Board during the reporting period:-

• The increased responsibilities associated with new forms of licences as well as increasing LPM sites, placed increased strain on

the ECGBB‟s budget allocation.

• AGSA‟s audit fee which increased to R1.9m in the year under review is high for an organisation the size of the ECGBB, placing yet

further demands on an already strained budget meant for the operations of the organisation.

• The legislative review spearheaded by DEDEAT has not yet been finalised. This has a negative impact on the regulatory work of

the ECGBB, and constrains its ability to implement technological advancements in the Industry.

• Increasing demands on board members as a result of the executive nature of the work of the ECGBB‟s Board of Directors present

a continuing challenge.

• The 1% tax on GGR imposed by national government has created some anxiety among gambling operators, which the Board has

had to manage.

1.6.4 The year ahead

For the year ahead the Board will focus and direct the management structures of the ECGBB to:

• Improve existing processes to enhance our efficiency in the consideration of applications for licences by potential applicants.

• Enhance our audit and compliance regime to ensure correct and accurate revenue is collected from the industry and transferred to

the Provincial Treasury timeously.

• Strengthen our responsible gambling and education campaigns, utilising various popular platforms to reach a target of up to two

million individuals in the province.

• Continue to strengthen our research capacity to build a strong foundation for valid and empirical research to inform new policy and

regulatory reforms.

Adv. N. Mayosi

8

• Enhance our empowering role as a regulator guided by, among other things, the Anti-Poverty Strategy of the province.

• Ensure alignment of the work of the ECGBB with National Government‟s 12 Outcomes; EC Provincial Priorities; Policy Imperatives

of the DEDEAT; and the National Development Plan.

1.6.5 Acknowledgements / Appreciation

On behalf of the Board of Directors, I would like to acknowledge and express my appreciation for the sterling work of the CEO and

ECGBB staff during the 2012/13 financial year. In addition, my thanks and appreciation goes to all the chairpersons and members of

the various Committees of the Board, as well as the members of the entire board. I also extend my sincere thanks to the Board and

its committees, as well as ECGBB management and staff, for helping to foster an environment that has allowed both management

and the Board the space to perform our respective responsibilities.

We also extend our appreciation to the Honourable MEC of DEDEAT and his management team for their guidance in terms of the

duties and responsibilities entrusted to us.

Furthermore, to the gambling operators and licensees whom we regulate and interact with, I express my deepest gratitude for the

space and time you afforded the ECGBB to conduct its business ensuring that there is improvement of and continued accountability

in the standards that we set for the industry.

1.6.6 Other Matter

The investigation into the irregular appointment of the CEO was concluded by the Public Protector in the current year. While it was

found that the board failed to properly consult with the Hon. MEC on the appointment of the CEO, it was recommended that due to

the long-outstanding allegation, appropriate remedial action be taken, and the CEO‟s appointment has been condoned by the

Board and the Hon. MEC.

1.6.7 Conclusion

The ECGBB is held responsible for governance and sustainable performance. As such, it is committed to good corporate

governance and will continue to make significant progress in this regard. Against the backdrop of increasing regulatory and

legislative compliance requirements within the gambling sector, we aim to strengthen our regulatory processes, with a view to

enhancing the Board's effectiveness and, in doing so, ensuring that it is aligned with the sound business practices expected of a

stable and functional organisation.

________________________________________

ADVOCATE NCUMISA MAYOSI

CHAIRPERSON OF THE ECGBB AND

ACCOUNTING AUTHORITY

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1.7. Chief Executive Officer’s Overview

1.7.1 An overview of the public entity’s achievements for the financial year under review

I am delighted to present the annual performance scorecard of the Eastern Cape Gambling

and Betting Board (ECGBB). The review period was an opportune moment for the organisation

to sharpen its regulatory armoury and instruments in preparation for the effective and efficient

regulation of the gaming industry. This enhanced, effective and efficient discharge of this

regulatory role should prove a direct correlation with ECGBBs socio-economic development

imperatives.

1.7.2 Enhanced regulatory role

As such, during the review period, the organisation injected its energy towards strengthening this role thorough monitoring of

licensees, conditions of licence as well as auditing. These conditions of licence include licensee commitments towards corporate

social investment and provincial spend.

This work had the intended effect of providing solid assurance that the fees and levies due and payable to the regulator and the

province are collected, complete and accurate. In this regard, the Board of Directors, under the energised and astute leadership of

chairperson Advocate Ncumisa Mayosi impressed on management that the resultant effects of this inspired regulatory role should be

an improved financial contribution to the Provincial Treasury through the collection of gaming taxes. An improvement in tax

collections should ensure that the organisation is able to make an enhanced contribution to the general expansion of the Eastern

Cape economy.

Furthermore, this was also anticipated to translate into an improvement in the general financial health of the organisation, operational

efficacy as well as a solid socio-economic contribution. This also meant the organisation had to augment its internal capacity,

improve systems and processes for the effective execution and delivery of its stated mandate. This requires an energised and

empowered human capital which is capacitated with the right skills set to execute organisational objectives. In this regard, the

organisation went through a process of profound internal renewal that should ensure that its human resources outputs support its

corporate objectives. Similarly, the organisation is acutely aware that it is only an empowered human capital base which understands

the culture of the business which should result in improved organisational efficiencies.

1.7.3 Empowered human capital

Subsequently, a five-year human resources strategy was put in place which took cognisance of the status quo and which lays down

the roadmap towards becoming an employer of choice. Among other activities, an employee satisfaction survey was conducted.

These employee survey inputs should find expression in how the organisation conducts its business. In addition, a number of policies

such as ones for talent management and succession planning were identified, a health and safety policy was developed, as well as

the review of the performance management policy which are key to mandate delivery.

While the organisation sought to empower its people, it also took on unemployed graduates. This programme serves a twin purpose.

It not only capacitates young graduates with the necessary skills set in anticipation of a fiercely competitive job environment, but it

also creates a talent pool for the organisation. Subsequently, three graduates were offered internship opportunities in the human

resources, strategic management services as well as the compliance and licensing business units. The heads of each unit monitor

and review the performance of each intern on a quarterly basis. ECGBB also extends training opportunities to them in the same

standard as those afforded full-time staff.

The organisation also pays a number of bursaries to staff which allows them to improve their skills, improve their performance and for

personal development. In the review period a total of 10 employees were on the bursary scheme in areas such as auditing, business

administration as well as financial management.

Furthermore, management appointments in information technology and human resources were made in the period under review. In

the same period, the vacancy rate dropped from 29% in the previous year to 8,9% in the current financial year. These interventions

have had a considerable impact on the delivery of performance targets.

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1.7.4 Performance dividend

I am pleased to announce that these interventions have declared a solid performance dividend for the organisation. They enabled the

organisation to achieve 82% of its planned targets measured against organisational performance of 66% in the previous financial

period. Not only did these interventions result in a 14th unqualified audit opinion, they ensured that ECGBB receive a clean bill of

health on its finances. The organisation is particularly proud of this achievement considering improvements in areas such as supply

chain management. This places the organisation on a firm footing towards a clean audit opinion and to maintain public trust on how it

uses taxpayer funds.

This has had a spill-over effect and direct bearing on how the organisation conducts its core business. The regulator is proud that it

has in the last six years contributed a total of R639 million to the Provincial Treasury through the effective collection of gaming taxes.

The tax revenues come from licensees in the form of casinos, limited payout machines, totalisators as well as bookmakers. In the

review period, ECGBB has continued this catalytic and empowering role collecting a total of R119 million in taxes exceeding its

planned target of R109 million.

Taxes from gaming revenue have increased at an average of 7% year-on-year. The improved collections were in part due to growth

in the industry itself and also as a result of effective and improved regulation.

Of the taxes collected a total of R89 million were from the provinces four casinos, R16 million from limited payout machines, R3,4

million from bookmakers , R3,6 million from totalisators and own revenue of R2 million. The regulator is currently engaged in a

process of issuing a fifth casino licence for zone 4 which is in the Mthatha, Port St John‟s, Libode and Coffee Bay area.

The growth in tax collections were largely driven by casinos spurred by recent reinvestments of R1 billion, R400 million and R340

million into the Boardwalk, Hemingway‟s and Wild Coast casinos respectively. An indication of this has been the steady growth of

gross gaming revenue (GGR) in casinos from R780 million in 2011/12 to R1,1 billion in the current financial year. Similarly, gambling

taxes in the casinos have increased from R71 million in 2011/12 to R89 million. Horseracing GGR has improved from R135 million in

2011/12 to R 150,8 million in 2012/13. Limited Payout Machine GGR grew from R137,1 million in 2011/12 to R161,3 million in the

review period. This is a total of R1,4 billion versus the GGR of R1,2 billion in the previous year.

The Eastern Cape gaming industry continues to be the fourth largest in the country behind Gauteng, KwaZulu/Natal and the Western

Cape. This increase is also attributable to the growing number of tourists visiting the province‟s casinos due to their high quality.

1.7.5 Bingo licensing

ECGBB also began a process of issuing the first bingo licences in the provinces during the review period. A total of six licences were

issued in Mthatha, East London, Port Elizabeth and in Jeffrey‟s Bay. With the addition of bingo, the revenue base is expected to

increase by between 10 and 15 percent once they are fully operational. This means there will be more money for the province to

invest on empowering projects. Linked to these new licences is the employment opportunities which come with the package. Each of

six licences will not employ less than 50 people.

1.7.6 Resource optimisation

Furthermore, the organisation is particularly pleased that it continues to collect more taxes than what it receives as grant funding to

discharge its core business. For example, during the review period, ECGBB received R28 million in grant funding to carry out its

operational obligations.

While the organisation saw an increase in the baseline by R7 million, it was for specific campaigns such as responsible gambling.

The budget has declined year on year other than the ring fenced funding. There are still challenges in actual operational expenditure

versus actual budget allocation. The province as a whole is experiencing financial difficulties with entities and departments required

to exercise fiscal restraint. This calls for a new way of doing business and to operate within the available resource allocations. As

such the organisation is looking at automating certain processes. The biggest cost to ECGBB is the cost of employment which is

sitting well over 55% of total budget. The true test will be striking a balance between this cost element versus goods and services.

1.7.7 Responsible gambling

During the period under review, ECGBB invested a lot of time and resources in dealing with problem gambling. While the

organisation works fervently to promote awareness of the industry and its growth thereof, it carries an obligation to educate citizens

on the effects of problem gambling and to prevent such behaviour. A person should not gamble more than they can afford. Gambling

11

should be no different than going to the movies. It should be seen as entertainment rather than a revenue stream or to chase

winnings.

The organisation has in the past commissioned a study into the economic benefits of gambling in the province. Part of this study

showed a decline in incidences of problem gambling but still high at 2%. This incidence rate still needs to decline. The national

average sits at 2,6%. People should be educated about gambling and what is involved and to make responsible choices. As a result,

ECGBB launched the first ever responsible gambling month in September 2012 going around the province educating people through

Imbizo‟s about responsible gambling. This was done in partnership with the Eastern Cape Parks and Tourism Agency (ECPTA).

This responsible gambling campaign is the first of its kind in South Africa. The spin-offs have been an increase in the number of

applications for exclusions of problem gamblers. The regulator runs an exclusions programme for those identified as problem

gamblers.

1.7.8 Brand recognition

These campaigns also build awareness and recognition of the ECGBB brand. People are becoming aware of the organisation and its

role in the gaming value chain and they are becoming cognisant of the organisation‟s regulatory role. Through these interactions

ECGBB is demonstrating that it is a regulator that cares.

1.7.9 Strengthening regulatory armoury

Similarly, without downplaying the effects of illegal gambling, it has been on the decline since the introduction of illegal gambling.

However, there are still concerns around internet gambling which are often disguised as internet cafes. In this regard, the

organisation, with the assistance of the South African Police Service and members of the public, destroyed illegal gambling machines

to the value of R2 million. Over and above the sweeps conducted by ECGBBs inspectorate throughout the province, the regulator

relies on members of the public to report such incidents. This work helps enhance the organisation‟s regulatory armoury and should

improve its prospects of becoming the best, most efficient and effective regulator.

1.7.10 Socio-economic posture

The organisation has continued to play its empowering role through Corporate Social Investment (CSI) initiatives. As an entity,

ECGBBs budget is steered towards socio-economic development. This is also translated into a local ownership of issued gaming

licences in the Eastern Cape. In the review period, the organisation contributed just shy of R1 million to CSI. ECGBB is equally

pleased that licensees are spending much higher in this area. ECGBBs CSI policy is geared towards early childhood development,

education, sport and health. The organisation looks at the social needs and aligning them with those of the province.

1.7.11 Appreciation

I would like to extend my appreciation to the MEC for Economic Development and Environmental Affairs, the Honourable Mcebisi

Jonas for his policy direction, the Board of Directors of the regulator for its inspired leadership, as well as the management team

which has made the discharge of ECGBBs mandate tenable. I also extend my gratitude to the staff of ECGBB for their resilience

despite a challenging operating environment. Lastly, I am also thankful to the licensees for their continued support in an endeavour to

build a sustainable, responsible and empowering gaming industry.

__________________________

MR. RM ZWANE

CHIEF EXECUTIVE OFFICE AND ACCOUNTING OFFFICER

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2. Part B: Performance Information

2.1 Statement of Responsibility for Performance Information

The Chief Executive Officer is responsible for the preparation of the public entity‟s performance information and for the judgements made in this

information.

The Chief Executive Officer is responsible for establishing and implementing a system of internal controls designed to provide reasonable

assurance as to the integrity and reliability of performance information.

In my opinion, the performance information fairly reflects the operations of the public entity for the financial year ended 31 March 2013.

-------------------------------

Name: RM Zwane (Mr)

Chief Executive Officer and Accounting Officer

Date: 31/05/2013

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2.2 Overview of the public entity’s performance

2.2.1 Strategic Outcome-Oriented Goals

OVERALL PERFORMANCE

VOTED FUNDS

GRANT FUNDING 2008/09 2009/10 2010/11 2011/12 2012/13 TOTAL

VOTED FUNDS 20 690 22 017 23 338 31 187 35 686 132 918

LESS REPAID - - - - - -

TOTAL 20 690 22 017 23 338 31 187 35 686 132 818

AIM OF VOTE

The ECGBB oversees all gambling and betting activities in the province and matters incidental thereto, as contemplated in the Act. It advises

the responsible Member of the Executive Council (MEC) for Economic Development and Environmental Affairs on gambling matters and

exercises certain further powers contemplated in the Act. The Aims of the ECGBB include:

Licensing of the gaming industry

Ensuring compliance with the Act by all licensees

Collection of gambling taxes on behalf of the province

Combating illegal gambling

Undertaking licensing investigations

Issuing and revocation of licences

Determining licence conditions

It is the responsibility of the ECGBB to ensure that an accountable and credible legal gaming industry exists in the province and that there is

compliance with internationally recognised standards in the industry.

STRATEGIC GOALS

To provide excellent services to our stakeholders

To institutionalise an international competitive regulatory system

To establish sound institutional oversight arrangements and systems to administer socio-economic development commitments that arises

from Licence conditions

To develop a high-performance, value- based organisation that recognises the ECGBB and its employees as its most important assets

To optimise revenue collection for the socio-economic benefit of underprivileged communities.

Goal 1 Goal Statement To provide excellent services to our stakeholders.

Progress Made by the ECGBB:

a) In pursuance of this goal, the ECGBB has developed a Stakeholder Management Strategy. This is a useful tool to support ECGBB‟s

strategic objectives by engaging and influencing the internal and external stakeholders through the creation of a platform to render

services direct to communities and regulatory services to the licenced operators in the province.

b) A performance survey was conducted by the ECGBB to assess the manner in which its employees conduct themselves when rendering

regulatory services. The outcome of the survey was generally positive as the licensed operators are satisfied with the manner in which

the ECGBB conducts itself.

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Goal 2 Goal Statement To institutionalise an international competitive regulatory system.


a) In pursuance of this goal, the Board developed and approved a controlled system of an international competitive bidding for issuing

licences which includes :

Publication of a draft request for proposals regarding different types of licences that the Board rolls out at different periods.

Hosting of Bidders Conferences to highlight the requirements of the RFP, draw attention to the EMRs, explain the consequences of

non-compliance and the evaluation process, and also to answer written questions put to the Board by prospective licensees.

Furthermore, applicants are allowed opportunity to raise issues from the floor and to allow the Board to receive input from interested

parties.

The Board conducts probity investigations into all applicants of different types of licences to be issued in collaboration with the SAPS

and other law enforcement agencies including their shareholders where applicable, to determine compliance with the legislative

requirements of the ECGBB Act.

Maintaining confidentiality with the process in terms of Section 25 of the Act.

Facilitating public participation to ensure transparency before a licence is awarded conducting public hearings hosted by the Board of

Directors.

Communication of Section 4(1) (b) (iii) of the Competition Act, 1998, which prohibits collusive tendering, to all applicants in order to

prohibit collusive tendering and anti-competitive behaviour.

Evaluation process of all applications and bids received for various licences is regulated in terms of the ECGBB Act, Essential

Minimum Requirements and additional mandatory requirements such as tax compliance, promotion of BBBEE, etc.

b) When a licence is finally issued and the licensee is operational, the Board conducts audits to ensure adherence with the conditions of the

licence including inspection of various gaming devices.

c) Over and above the inspection and revenue audits, the Board also ensures law enforcement and gaming control especially among

operators who operate illegally and who were not licenced by the Board.

d) In addition, the Board has started strengthening its Responsible Gambling Campaigns and consumer protection strategies, as well as

driving public education on legal and illegal gambling.

e) In strengthening the regulatory system and ensuring that the Board is internationally competitive, the Board is also beginning to invest in

gambling research as this is an area that successful regulators are working on to inform policy and regulatory and strategic reforms.

Goal 3 Goal Statement To establish sound institutional oversight arrangements and systems to

administer socio-economic development commitments that arise from casino

licence conditions


a) Following the appointment of the Board of Directors, a number of structures and committees were established by the Board to facilitate

oversight performance of the ECGBB as part of institutional oversight responsibilities.

b) An Organisational Performance Reporting System has been institutionalised to ensure that Management Accounts in terms of its

performance as well financial prudence. Management reports to the Board on quarterly basis regarding organisational performance.

c) An Audit and Risk Committee has been established to fulfil oversight responsibility for the financial reporting process. Other measures

which have been successfully implemented include systems of internal control processes for monitoring compliance with laws and

regulations as well as the Code of Conduct.

d) In addition, conditions attached to all four casino licences will ensure that licence holders / operators establish dedicated Trusts that will

specifically benefit previously disadvantaged individuals from the Eastern Cape Licence holder / Operator in order to benefit the

Previously Disadvantaged Individuals from the Eastern Cape.

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Goal 3 Goal Statement To establish sound institutional oversight arrangements and systems to

administer socio-economic development commitments that arise from casino

licence conditions

e) The ECGBB is also promoting meaningful empowerment in the gambling industry in the province by requiring adherence to the principles

of BBBEE, specially the Level 2 target to be achieved by 2015. In some new casino developments, there is a minimum shareholding by

local empowerment partners in management companies as a licence condition, where the empowerment grouping must receive at least

30 percent of the management fees due to the management company.

f) Furthermore, a number of Trusts have been established by the Casino licensees as part of their Conditions of Licence. These include:

Amatola Trust: Hemingways Casino (R10 million once-off donation made in 2001)

Boardwalk Trust: Boardwalk Casino (15% shareholding in the Licensee).

Mbizana Development Trust: Wild Coast Casino (30% shareholding in the licensee).

Zulukamma Trust: Queens Casino (4.5% shareholding in the licensee)

Goal 4 Goal Statement To develop a high performance value based organisation that recognises the

ECGBB and its employees as its most important assets.


a) The ECGBB has developed a Human Resources Management Strategy that positions its people as unique assets that provide a

sustained, competitive advantage within the rapidly changing business environment.

b) An Employee Perception and Satisfaction Survey was conducted to determine the perceptions and thoughts of the employees on a

range of factors in their work environment. Action plans have been put in place to address areas of concern arising from the survey.

c) A number of employee wellness sessions were held to educate and capacitate employees on various wellness issues.

d) Furthermore, the ECGBB provides training platforms to a number of employees to ensure that they are capable of executing their line

function responsibilities.

e) A select number of employees have been allowed to attend international conferences to gain more exposure and insights into gambling

regulation, research and consumer protection, as well as public education.

Goal 5 Goal Statement To optimise revenue collection for the socio-economic benefits of

underprivileged communities.


a) The second route operator licence was awarded in December 2012. The licensee started operating with its first limited payout machines

in March 2013.

b) The Board issued request for proposals for Bingo licences which closed in December 2013. The Board is in the process of awarding

these licences.

c) It is anticipated that the licences will be awarded in July 2013 and that the operators will begin operating in September 2013.

17

2.2.2 Overview of the Service Delivery Environment

Context within which the ECGBB operated during the 2012/13 financial year

To assist users of the annual report to gain an understanding of the challenges, successes and other factors that might impact on the ECGBB‟s

performance, the following overview is provided of the context within which the ECGBB implemented its five year strategic plan and three

annual performance plan for 2012/13-14/15 MTEF period.

During the 2012/13 financial year, the following contextual factors informed the operations and activities of the ECGBB:-

• Fostering a better understanding and appreciation of the requirements of our regulatory regime by engaging at a strategic level with

all stakeholders in the province.

• Enhancing our knowledge base of the gambling industry, which informs risk assessments that enabled us, among other things, to

clarify and, in some cases, reduce the information requirements of the gambling industry.

• Informing consumers and the public about legal and illegal gambling activities and implementing and completing a gambling

consumer education strategy.

• Enhancing investigations and intelligence gathering and strengthening our relationship with the Criminal Justice Cluster in the

province.

• Developing and refining our responsibility to contribute meaningfully to the social milieu of the Eastern Cape.

ECGBB’s Overall Performance

A balanced overview of performance by the ECGBB is provided below. This not only highlights relevant factors that might be regarded as

„mitigating circumstances‟ to support the ECGBBs delivery record, it also offers overall performance highlights and flags successes that were

achieved against planned targets.

In addition, significant developments per budget programme have been identified including the manner in which they impacted either on the

demand for the ECGBB‟s services or on the ability to deliver those services.

The ECGBBs overall performance and its key outputs, particularly as it relates to services rendered directly to the public during the reporting

period, can be summarised as follows:-

• The ECGBB developed first ever Gambling Consumer Protection Strategy in order to inform, advice consumers of gambling services

including choices to be made regarding gambling and mitigating excessive gambling.

• Six responsible gambling campaigns were successfully hosted during the reporting period, including the 2012 September Campaigns

that were related to the National Tourism Month activities for responsible gambling.

• Three seminars were hosted on problem gambling and consumer protection.

• In protecting the public interest from unfair illegal competition, five operation raids were conducted on illegal gambling activities in the

province.

• Three platforms (print, electronic, events) were successfully utilised to communicate and profile the work of the ECGBB to the

broader population of the province including the production of three newsletters which were introduced for the first time.

• An amount of R899 000.70 was made available directly to a number of organisations in the Eastern Cape during the reporting year

towards meeting the social responsibility of the ECGBB, as guided by its Socio-Economic Development Policy and the Eastern Cape

Anti-Poverty Strategy championed by the Eastern Cape Department of Social Development and Special Programme.

Over and above rendering services direct to the public, the ECGBB also provides regulatory services to the Industry in terms of the Eastern

Cape Gambling and Betting Act. The following regulatory services were conducted successfully during the reporting year:-

• 88 licence applications for various gambling licences were investigated with 88 public hearings conducted during the reporting period

to ensure transparency in the process of awarding licences.

• 85 gambling licences were issued by the Board to qualifying applicants. These included Type A and B licences, Route Operator

licences, Transfer of Type A Licences, Bookmaker and Acquisition of Interest Licences from a licence holder.

• 67 Compliance Audits were conducted at a number of licence operators within the province.

• 1293 gambling devices were tested for quality assurance purposes and to verify that they meet the National Regulator for

Compulsory Specifications (NCRS) and National Standards & Norms applicable to gambling devices

• 28 Revenue Audits were conducted in order to verify the authenticity of gaming revenue generated by all the operators within the

province, and R114 million was transferred to the Provincial Treasury

18

• 15 Annual Financial Statements of Licences were reviewed and analysed as part of the regulatory financial requirements of the Act.

• 9 FICA compliance audits were also conducted.

Challenges encountered and corrective steps

The table below details challenges encountered by the ECGBB during the reporting period in providing the relevant services, and corrective

steps that were/are to be taken in dealing with these challenges.

BUDGET SUB-

PROGRAMME

PERFORMANCE

INDICATOR

CHALLENGES ENCOUNTERED CORRECTIVE STEPS UNDERTAKEN OR TO

BE ADDRESSED

Investigation and

Licensing

Administration

Percentage of Licence

applications Investigated.

Priority was given to bingo licensing process. Due to

the magnitude of applications received all the available

resources were utilised for this purpose.

The Board is embarking on window periods for

each type of licence to be issued; upon which

each type of licence will have its own dedicated

period.

Law Enforcement

and Gaming

Control

Number of MOU‟s developed

with SAPS, SARS, FIC and

NPA

Numerous attempts were made to secure meetings

with the relevant institutions with no avail. However, our

licensing officers maintain a positive working

relationship with both SARS and SAPS officials at

lower level.

Due to non-availability of these officials, the board

has investigated an option of utilising creditable

organisation (INDECO) to provide the board with

the necessary probity information. This has been

normal with all other gambling board to utilise

these institutions.

Number of Casino Gambling

Devices tested.

Unplanned targets to test gambling devices caused

derailment in other planned targets.

Licensees will be engaged to submit their

projections on their need for the ECGBB to test

their devices in order for these projections to be

used as reporting indicators rather that forward

looking planning indicators.

Audit and

Compliance

Services

Number of Environmental

Audits Conducted.

There was a delay in concluding the tripartite Service

Level Agreement which was resolved in the last

quarter. Suitable dates could not be secured with the

appointed service provider to complete the audits by

year end.

The respective Service Level Agreements

concluded are for a period of three years.

Socio Economic

Development

MOU‟s developed between

the ECGBB and Licensees

Trusts.

The Trust was unable to sign the proposed SLAs or

MOUs because the SLAs or MOUs appeared to be a

repetition of the conditions of licences

Content and context of the proposed MOUs will be

included in the current conditions of licences

which will then be amended and submitted to the

Board for approval.

Number of Donations or

Sponsorships awarded to

deserving communities

A number of applications were received from

communities seeking assistance from the Board,

especially for boxing purposes. However, the budget of

the SED Budget Sub-programme is limited and

decreasing in real terms.

The SED Policy will be utilised accordingly and a

committee to adjudicate proposal and request will

consider whether these proposals are compliant

with the SED Policy.

Legal Services

and Board

Secretariat

Legislative Review Processes Non-finalisation of the review of the ECGBB Act and

the Regulations.

Develop a new schedule to be approved by the

Hon. MEC that will ensure the finalisation of the

process that was started in the previous financial

year. The ECGBB will also engage the Legislative

Review Committee at the Provincial Legislature to

ensure that the process of reviewing the Act and

the Regulations is done and finalised within the

second quarter of 2013/14 financial year.

Description of Significant Developments

Significant developments external to the ECGBB took place during the reporting period. These have impacted either on the demand for the

ECGBB‟s services or on the ECGBB‟s ability to deliver its services.

19

Significant Developments within the Corporate Services Management & Administration Budget Programme One

PERFORMANCE INDICATOR SIGNIFICANT

DEVELOPMENTS

NAME OF THE SIGNIFICANT

DEVELOPMENT IN 2012/13

IMPACT ON THE DEMAND FOR THE

ECGBB’SSERVICES

IMPACT ON THE ECGBB’S

ABILITY TO DELIVER ITS

SERVICES YES NO

STRATEGIC MANGEMENT SERVICES

Number of Medium to Long

term Statutory Planning

Documents Tabled at the

Provincial Legislature.

X New Proposed Treasury

Regulations regarding the

Development and Tabling of

Operational Plans of

Departments and Entities

N/A The ECGBB will be expected to

develop and table the Operational

Plan at the same time with the

Annual Performance Plan in the

2013/14 financial year.

Stakeholder Management

Strategy Approved

X The approval and adoption of

the Stakeholder Management

Strategy of the ECGBB.

The approved Stakeholder

Management Strategy will require the

ECGBB to engage comprehensively

with all its stakeholders and strategic

partners in order to realise the

objectives of the ECGBB.

The limited capacity of the SMS

Division to ensure that all potential

stakeholders of the ECGBB are

engaged may hamper the ability of

the ECGBB to implement the

Stakeholder Management Strategy.

LEGAL SERVICES AND BOARD SECRETARIAT

Percentage of various licences

issued by the ECGBB.

X The issuing of various licences

in particular the 2nd Route

Operator

The Board is compelled to sit regularly

so as to issue gambling licences for all

the submitted applications for licences.

Costs incurred by the ECGBB in terms

of Board Fees have increased as a

result of the number of gambling

licence application to be adjudicated.

The more licences the ECGBB

issues to successful applicants the

more it will have to increase its

inspection and auditing capacity to

ensure that the new operators

comply fully with all licence

conditions.

ECGBB Legislation reviewed. X The non-finalisation of the

Review of the ECGBB Act and

Regulations

The demand on the ECGBB‟s services

increased and is further aggravated by

the need to ensure that the

ECGBB legislation is finalised in order

for services to be properly provided in

terms of updated legislation.

The ECGBB‟s delivery of services

is hampered by the fact that an

obsolete Act negatively impacts its

ability to achieve optimum service

delivery.

HUMAN RESOURCES MANGEMENT AND DEVELOPMENT

Approved Human Resource

Plan of the ECGBB.

X The approval of the HRM

Strategy by the Board of

Directors

Recruitment and retaining of key

employees that will drive the

ECGBB‟s strategic objectives.

Number of Unemployed

Graduates on 12 Months

Internship Programme.

X 3 Unemployed Learners

Recruited.

Unemployed learners are capacitated

with practical experience in the

industry.

The organisation trains interns in

areas identified with skills

shortages so that they may be able

to be placed when positions

become vacant.

Significant Developments within the Gambling Regulation and Consumer Protection Budget Programme Two

PERFORMANCE INDICATOR SIGNIFICANT

DEVELOPMENTS




ECGBB’SSERVICES


ABILITY TO DELIVER IT’S

SERVICES YES NO

LAW ENFORCEMENT AND GAMING CONTROL

Number of operations / raids

(“Sweeps”) conducted on

illegal gambling in the

province.

X The closure of illegal sites

and confiscation of illegal

machines

The continuous detection of illegal

gambling sites and the higher number

of intelligence reports the ECGBB

receives will certainly increase the

demand for services and actions to

strengthen our law enforcement

activities.

The more successful the

organisation is in terms of illegal

gambling operations, the more it

will be required to testify in courts of

law to ensure the availability of

credible evidence. These court

processes may delay the

organisation in strengthening its law

enforcement and gaming control.

20

CONSUMER PROTECTION AND PUBLIC EDUCATION

Gambling Consumer

Protection Strategy Approved.

X The development of the

Gambling Consumer Protection

Strategy.

The implementation of the Strategy will

cause an increase in the demand for

the services of the ECGBB.

Human Resources shortages to

effectively implement the strategic

imperatives of the Strategy will

have a negative impact on the

implementation of the Strategy.

Number of responsible

gambling campaigns

conducted accordingly.

X The Focused 2012 September

month activities on Responsible

Gambling Campaigns.

There will be an increasing demand for

the services of the ECGBB to

communicate with and inform

communities, and consumer of

gambling activities.

An inability to prioritise the sub-

division as well as the non-

appointment of personnel to

champion the implementation of

responsible gambling campaigns

will impact negatively on the ability

of the ECGBB to implement this

mandate.

Significant Developments within Research and Development Budget Programme Three

PERFORMANCE

INDICATOR

SIGNIFICANT

DEVELOPMENTS




ECGBB’SSERVICE’S


ABILITY TO DELIVER IT’S

SERVICES YES NO

EMPIRICAL RESEARCH ON GAMBLING INDUSTRY

Research and Development

Strategy approved by the

Board of Directors of

ECGBB.

X The development of the

Research and Development

Strategy of the ECGBB

The areas and themes of the Research

and Development Strategy will

contribute on the demand by various

operators and institutions to conduct

research on various areas associated

with Gambling Regulation and

Consumer Protection

The non-prioritisation of Research

and Development including non-

provision of budget as a Budget

Programme of the organisation will

impact negatively on the

implementation of the strategy and

further deprive the ECGBB of the

evidence -based knowledge the

organisation needs to effectively

conduct its business.

Number of MOU‟s developed

to strengthen the Research

Agenda of the ECGBB.

X Signing of MOUs with Different

Universities.

The ECGBB will be expected to

provide comprehensive leadership on

research in the area of Gambling

Regulation and Consumer Protection

Lack of capacity and utilisation of a

single official will impact negatively

on the implementation of the

approved Research and

Development Strategy, including an

inability to benefit from conducting

research and producing research

outcomes to inform potential policy

reforms and strategies.

21

2.2.3. Overview of the Organisational Environment

In preparing the 2012/13, 2013/14 and2014/15 APP, the ECGBB identified a number of organisational development weaknesses to be

addressed over the next three to five years. These were characterised in terms of the following:-

• Undefined Budgeting Processes to ensure that the Department of Economic Development Environmental Affairs and Tourism

allocates an appropriate budget that is based on the mandate and service delivery performance of the ECGBB. Lack of Human

Capital and personnel to ensure that the ECGBB is able to execute its responsibility to regulate the gambling and betting industry,

and to protect consumers and the general public with regards compulsive gambling.

• Lack of an Information Management System to ensure that information developed is properly documented and stored appropriately

for ease of utilisation.

• Lack of cohesion with and among employees of the ECGBB, characterised by an absence of teamwork, guidance and mentoring of

employees by senior managers of the organisation.

• Non-documented procedures and processes (SOP‟s) to conduct the core business of the ECGBB.

In mitigating the above matters, it is important to report the following:-

• The budget process of the ECGBB was developed adherence to the three Budget Programmes of the organisation, with Planned

Targets informed by the statutory requirements of the ECGBB as well as other prescripts and funding responsibilities.

• Although a number of personnel were appointed in 2012/13, this remains a significant challenge, especially within the Supporting

Services of the ECGBB as work performed is voluminous.

• The organisation started utilising the DIGIBILITY Information Management System to document and appropriately store information

generated by the organisation, for ease of utilisation. In addition, research on the records and document management was also

conducted and a report to guide the ECGBB was submitted for consideration.

• With regards to these lack of social cohesion within the ECGBB, two team building exercises were conducted, the efficacy and impact

of which has yet to be determined. Of significance was the development of the Human Resources Management Strategy which

outlines various strategic imperatives related to employee-management relations and processes that should be undertaken to address

this organisational challenge.

2.2.4 Key policy developments and legislative changes

There were no major changes to relevant policies or legislation within the ECGBB during the 2012/13 financial year.

2.2.5 Summary of Revenue Collection

SUMMARY OF REVENUE IN THE LAST FIVE YEARS

GAMING PERFORMANCE

REVENUE

CATEGORY

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 TOTAL

Rm Rm Rm Rm Rm Rm Rm

REVENUE TO

FISCUS

Casino 71 556 70 516 70 595 73 768 78 887 89 044 454 366

Bookmakers Taxes 2 296 2 339 2 370 2 272 2 851 3 439 15 567

Totalisator Taxes 4 116 4 147 4 079 3 995 3 987 3 613 23 937

Total taxes 77 968 77 002 77 044 80 035 857 25 96 096 493 870

LPM 9 300 10 840 10 356 10 187 13 711 16 130 70 524

Fees 1 801 1 378 1 630 1 965 2 502 2 646 11 922

Exclusivity Fee - - - 42 738 20 000 - 62 738

TOTAL TO FISCUS 89 069 89 220 89 030 134 925 121 938 114 871 639 054

22

REVENUE CATEGORY

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 TOTAL

Rm Rm Rm Rm Rm Rm Rm REVENUE TO FISCUS

OWN REVENUE

Application Fee 2 319 2 086 221 997 566 788 6 977

Administration Fee 543 2351 1 946 2 233 2 830 2 542 12 445

TOTAL OWN REVENUE 2 862 4 437 2 167 3 230 3 396 3 330 19 422

Gambling and betting taxes, fees and interest collected during the financial year under review totalled R114, 9 million

(2011/12: R121, 9 million).

The total Gross Gaming Revenues (GGR) generated in the financial year under review was R1, 4 billion. Full details are contained in the

annual financial statement.

The following is a graphical depiction of the gaming performance per gaming category:

Revenue and Tax Statistics 2012/2013 vs 2011/2012

23

24

Distribution of Gambling and Betting Takings: 2012/13 Financial Year

25

26

Summary of actual revenue collected against budget.

Source of Revenue

2012/13 2011/12

Budget Amount

R’000

Actual Amount

Collected R’000

(Over)/Under

Collection R000

Budget Amount

R’000

Actual Amount

Collected R’000

(Over)/Under

Collection R000

Casino 86,599 89,047 (2,448) 77,260 78,886 (1,626)

Route Operators 13,416 16,130 (2,714) 13,515 13,710 (195)

Totalisator 5,307 3,612 1,695 4,370 3,987 383

Bookmakers 2,592 3,439 (847) 2,630 2,851 (221)

Annual license and

registration fees 1,833 2,226 (393) 1,895 2,501 (606)

Bank Interest 270 419 (149) 110 939 (829)

Exclusivity Fee - - - 21,000 20,000 1,000

110,017 114,873 (4,856) 120,780 122,874 (2,094)

Casino fees collected were by R2, 448 million over the budget target. This is a result of an increase in gross gaming revenue achieved by the

casinos. Boardwalk, Hemingway‟s and Wild Coast Sun completed their major capital revamp. This resulted in an increase in gross gaming

revenue and a subsequent increase in gaming taxes.

Route operator taxes increased by R2, 714 million. This was caused by V-Slots increasing their allocation of limited payout machines to the

allocated 1000 machines. This increase also resulted from the second route operator, Pioneer Slots starting operations during the year.

2.2.6 Summary of payments by programme

ACTUAL VS BUDGET EXPENDITURE BY PROGRAMME

Programme Name Budget Actual expenditure

Over / (Under)

Expenditure Budget Actual expenditure

Over / (Under)

Expenditure

R'000 R'000 R'000 R'000 R'000 R'000

Corporate Service

Management and

Administration 26,575 30,080 3,505 28,986 34,599 5,612

Gambling Regulation

and Consumer

Protection 16,617 15,285 (1,331) 9,191 7,587 (1,604)

Research and

Development 841 864 24 - - -

Total 44,032 46,229 2,197 38,177 42,186 4,009

2011/122012/13

Corporate Service Management and Administration overspent on the following areas during the current financial year:

External audit fee

Printing and stationery

Maintenance of the building and fixtures and fittings

Water, electricity and property rates and taxes

Consulting fees relating to job grading

Staff wellness and well being.

CAPEX

Gambling Regulation and Consumer Protection overspent on Hearing and Evaluation costs. This was due to the extensive process involved in

the bingo licensing process. It under spent COE related costs in the Consumer Protection sub-programme.

Research and Development under spent on budget as a result of not meeting the survey and research targets for the year.

27

2.3 Programme Performance

2.3.1 Budget Programme 1: Corporate Services Management & Administration

2.3.1.1 Purpose of the programme

The purpose of this programme is to provide corporate administrative and management support services to the organisation including

the Board of Directors in ensuring that the mandate of the ECGBB is executed and achieved accordingly.

2.3.1.2 Sub-programmes

• Office of the Chief Executive Officer

• Strategic Management Services

• Legal Services and Board Secretariat

• Financial Management

• Human Resources Management and Development

• Communication and Marketing

• Designated Programmes and Vulnerable Groups

• Socio Economic Development

• Information Management and Technology

2.3.1.3 Strategic objectives

• To deliver a quality customer-oriented service to the public, licensees and other stakeholders.

• To maintain and review effective risk management systems.

• To ensure that only suitable qualified applicants are awarded licences and licence holders optimise revenue growth and

measurable contributions to socio economic development.

• To influence and maintain a regulatory framework for the gambling industry and provide appropriate advice to the

responsible executive authority.

• To ensure accurate budgeting, sound cash flow management and preparation of management accounts and AFS in

accordance with relevant standards and legislation.

• To review and update human resources policies.

• To ensure an adequately trained and resourced staffing structure to deliver a quality service.

• To implement a balanced scorecard and integrated performance management system capable of monitoring and

evaluating performance at shareholder, Board and operational levels.

• To ensure optimal information & communication systems.

• To ensure that the Act, Regulations and Rules meet the needs of the province and developments within the industry.

• To review, maintain and update secure and appropriate information technology systems.

28

2.3.1.4 Key Performance measures, their targets and actual results for 2012/13 Financial Year

Strategic Objectives:

To deliver a quality customer-oriented service to the public, licensees and other stakeholders; and

To maintain and review effective risk management systems.

OFFICE OF THE CEO

Performance Indicator Actual Achievement 2011/2012 (Baseline Information)

Planned Target 2012/2013

Actual Achievement 2012/2013

Variance from2011/2012 to 2012/2013

Deviation from planned target for 2012/2013

Comment on Variances

Number of governance sessions hosted with the HOD & Hon. MEC of DEDEAT in terms of the SLA.

4 4 2 -2 -2

Achieving the planned target depends on the availability of the Hon. MEC and is therefore not in the control of the ECGBB.

Number of interaction sessions with licensees regarding regulatory services of the ECGBB. (Casinos, Route Operators, Bookmakers & Totalizator).

22 22 18 No Variance -4

The non-achievability of the planned targets was competing responsibilities which resulted in other sessions with licensees not being hosted. There were no budget implications regarding this matter.

Number of new international agreement signed.

1 1 0 -1 -1

The Research Partners in Canada wanted to meet and engage the ECGBB. This was not the budget was not sufficient to travel to Canada.

Revised Risk Management Policy of the ECGBB approved by the Board of Directors

1 1 1 No Variance No Deviation

Number of Risk Assessment Reviews conducted.


Percentage of the Risks Register Updated.

100% 100% 100% No Variance No Deviation

Number of mandatory Internal Audits conducted.


Number of Managers with Risk Management included in their Individual Performance Agreements

Not Applicable 10 10 No Variance No Deviation

SUB-PROGRAMME: STRATEGIC MANAGEMENT SERVICES


To deliver a quality customer-oriented service to the public, licensees and other stakeholders.







Planning and Organisational Performance Framework Approved.

N/A 1 1 No Variance No Deviation

Number of medium to long term Statutory Planning Documents tabled at the Provincial Legislature.


Number of sessions to N/A 3 3 No Variance No Deviation

29

SUB-PROGRAMME: STRATEGIC MANAGEMENT SERVICES









communicate the strategic imperatives of the ECGBB to all its stakeholders.

Number of organisational Performance Compliance Reports submitted on time.


Stakeholder Management Strategy approved.


Framework on developing policies approved


Non-Financial Performance Information Policy of the ECGBB approved.


SUB-PROGRAMME: LEGAL SERVICES AND BOARD SECRETARIAT


To ensure that only suitably qualified applicants are awarded licences and that licence holders optimise revenue growth and measurable contributions to socio economic development; and

To influence and maintain a regulatory framework for the gambling industry and provide appropriate advice to the responsible MEC.

Performance Indicator

Actual Achievement 2011/2012 (Baseline Information)






Percentage of various licences issued by the ECGBB.

N/A 100%

85 100%

85 No Variance

No Deviation

Number of sub-committee reports approved by the ECGBB Board of Directors.

25 18 18 -7 No

Deviation

Number of sub-committee meetings in 2012/13 was reduced

Number of internal Organisational Performance Reports to be considered by the ECGBB Board of Directors

4 4 4 No Variance No

Deviation

Number of mandatory reports submitted by the Board of Directors.


Deviation

Legal Policy Framework approved

N/A 1 1 No Variance No

Deviation

30

SUB-PROGRAMME: LEGAL SERVICES AND BOARD SECRETARIAT


To ensure that only suitably qualified applicants are awarded licences and that licence holders optimise revenue growth and measurable contributions to socio economic development; and

To influence and maintain a regulatory framework for the gambling industry and provide appropriate advice to the responsible MEC.


Actual Achievement 2011/2012 (Baseline Information)






ECGBB legislation reviewed


Deviation

Percentage of legal advisory services provided

100% 100% (78) 100% (78) No Variance No

Deviation

SUB-PROGRAMME: FINANCIAL MANAGEMENT SERVICES

Strategic Objective:

To ensure accurate budgeting, sound cash flow management and preparation of management accounts and AFS, in accordance with relevant standards and legislation.







Budget Planning Process approved.


Revenue collected. N/A R112m R114m No Variance +R2m

Revenue generation was more than anticipated, as was projected and planned. There were no budgetary or financial implications.

Number of Financial Compliance Reports Submitted on time

100% (2)

18 18 No Variance No Deviation

Procurement Plan Approved N/A 1 1 No Variance No Deviation

Number of EME‟s contracted. N/A 10 minimum 46

EME‟s No Variance +36 EMES

EME‟s used for procurement of goods & services was more than anticipated. However, the expenditure incurred was within the budgeted amount for the period under review.

Percentage monitoring of budget over / under expenditure per programme

N/A 10%

10%

No Variance No Deviation

Number of verifications conducted on ECGBB fixed assets


31

SUB-PROGRAMME: HUMAN RESOURCES MANAGEMENT AND DEVELOPMENT


To review and update human resources policies.

To ensure an adequately trained and resourced staffing structure to deliver a quality service; and

To implement a balanced score card and integrated performance management system capable of monitoring and evaluating performance at shareholder, Board and operational levels.







Approved Human Resource Plan of the ECGBB

25% 1 1 No Variance No Deviation

Employment Equity Plan of the ECGBB Approved


Disaster Management Plan of the Board Approved


Number of disaster management drills conducted at the ECGBB offices


Percentage of contracted employees from the beginning of the financial year

100% (33)

100% (45)

100% (45)

No Variance No Deviation

Training Development Plan of the ECGBB approved

65% 1 1 No Variance No Deviation

Number of employees provided with training to execute the ECGBB mandate

N/A

32

21 No Variance -11

Training was prioritized in terms of relevance and importance to the -divisions. Budget allocated became insufficient because of price increase in the cost of training by different training institutes and service providers.

Number of Unemployed Graduates on 12 months internship programme.


Number of bursaries awarded to employees of ECGBB

N/A 7 10 No Variance +3

Additional employees applied for bursaries. The Bursary Budget had sufficient funds to accommodate more applicants and all the bursaries were aligned to the organisations priorities.

Number of employee wellness sessions conducted.


The Organisation was approached by an NGO to promote HIV& AIDS awareness during World Aids Day to all employees of the ECGBB. There was no additional budget that was utilised for this awareness session.

Number of performance assessment reviews conducted on ECGBB employees


32

SUB-PROGRAMME: COMMUNICATION AND MARKETING


To ensure optimal information and communication systems.

Performance Indicator Actual Achievement 2011/2012 (Base Line Information)





Comment on variances

Advertorial programme of the ECGBB approved.


Number of external newsletters to communicate strategic imperatives of the ECGBB.

0 4 3 +3 -1

The employee that is responsible for this sub-programme is also responsible for three other major sub-programmes within the ECGBB. Capacity to implement all the planned targets therefore remained a serious challenge.

Number of platforms to profile the work of the ECGBB (print, electronic and general events platforms)


Two additional platforms were made available to the Board to profile and communicate the work of the ECGBB.

Communication Crisis Plan approved.


SUB-PROGRAMME: SOCIO ECONOMIC DEVELOPMENT


To ensure that the Act, Regulations and Rules meet the needs of the province and developments within the industry.







SED policy reviewed. N/A 1 1 No Variance No Deviation

Number of Functional SED Projects of the ECGBB.


Number of MOU‟s developed between the ECGBB and the Licensees Trusts.

N/A 5 0 No Variance -5

MOU‟s have been developed and all the Trusts were consulted and engaged in the process to sign the MOUs. Despite numerous attempts of persuade Trustees to sign the MOU‟s, they are still engaging / consulting with their legal advisors on this issue. There were no budgetary implications for this target.

Number of functional Trusts supported in terms of licence conditions.


Two Trusts – Amatola Trust and Boardwalk Trust are not and therefore and was no support to be provided as planned. There were no budgetary implications regarding the two non-operational Trusts.

Number of sessions attended to acknowledge the designated groups within the province. (Youth, Disabled, Women and Elderly)


33

SUB-PROGRAMME: INFORMATION MANAGEMENT AND TECHNOLOGY


To review, maintain and update secure and appropriate information technology systems







Number of Information Technology Systems Approved

N/A 4 3 No Variation -1

DEDEAT instructed all public entities to cease the development of Performance Information Systems as they are going to lead the development and alignment of IT Performance Systems.

Percentage of a Functional Intranet of the ECGBB.

100% 100% 100% No Variance No Deviation

Percentage of a Functional Internet of the ECGBB

98% 100% 100% +2% No Deviation The functional time of the internet improved during 2012/13

Percentage of a Functional Gambling Information Management System of the ECGBB

95% 100% 100% +5% No Deviation

The functional time of the Information Management System improved during 2012/13

Summary of payments by sub-programme of Budget Programme One:


Over / (Under)


Over / (Under)

Expenditure

R'000 R'000 R'000 R'000 R'000 R'000

Office of the CEO 5,484 5,191 (292) 10,395 17,841 7,445

Strategic Management

Services 3,560 3,404 (156) 2,287 246 (2,041)

Financial Management 6,052 6,720 667 5,323 6,754 1,431

Legal Services and Board

Secretariat 4,830 6,263 1,433 2,815 165

Human Resource

Management and

Development 4,372 5,494 1,122 3,976 4,232 256

Communication and

Marketing 981 1,244 263 3,233 3,336 102

Socio Economic

Development 389 883 495 - 1,004 1,004

Information Management

and Technology 909 881 (28) 957 1,022 65

Total 26,575 30,080 3,505 28,986 34,599 8,262

2012/13 2011/12

Primary areas of actual to budget differences are as follows:

Financial Management

o Increasing audit fees

o Increased cost of printing and stationery

Legal Services and Board Secretariat

o Higher than anticipated Board members remuneration as a result of the intense involvement of Board member‟s in the

bingo licensing process.

Human Resource Management and Development

o Increased need for CAPEX items to cater for increased headcount

o Costs of building and fixtures and fittings maintenance higher than budgeted

o Ever increasing rates and taxes

o Consulting fees as a result of workforce planning and organisational design analysis

34

Strategies to overcome Areas of underperformance by Budget Programme One:

BUDGET SUB-PROGRAMME

PERFORMANCE INDICATOR 2012/13 TARGET : VARIANCE (-) OR DEVIATION (+)

STRATEGY TO OVERCOME UNDERPERFORMANCE (VARIATION) AND DEVIATION FROM THE PLANNED TARGETS

RELEVANT OFFICIAL

Office of the CEO

Number of governance sessions hosted with the HOD & Hon. MEC of DEDEAT in terms of the SLA.

-2 The ECGBB will treat this indicator as a reporting indicator and not as a forward looking or planning indicator as it is not in the control of the ECGBB.

Mr. D. Mzonke

Number of interaction sessions with Licensees regarding regulatory services of the ECGBB. (Casinos, Route Operators, Bookmakers & Totalizator).

-4

The reporting period for the number of licensees sessions will be reduced from quarterly to bi-annually in order to report the sessions in the financial year it has occurred.

Number of new international agreement signed.

-1 This indicator and target will be included in the International Travelling Schedule of the Board. It will not be a standalone activity and will further be treated as a reporting indicator.

Human Resources Management and Development

Number of employees provided with training to execute the ECGBB mandate.

-11

The Division will conduct an annual training needs analysis in order to determine the actual provision of training based on the strategic objectives of the ECGBB. Quarter Training Reports to measure the impact of the provision of training will be developed and submitted during the 2013/14 financial year.

Mrs. A. Camagu Number of bursaries awarded to

employees of ECGBB +3

The consideration of internal bursaries to be awarded to employees will be informed by intensive engagements of all employees as well as the Bursary Policy of the ECGBB to ensure the planned bursary targets are determined before the end of the calendar year.

Number of employee wellness sessions conducted

+1

A proper Employee Wellness Programme informed by an Employee Wellness Policy or Human Resources Management Strategy will be developed with clear planned targets including engaging other organisation so that their services are included in the EWP of the year.

Communication and Marketing

Number of external newsletters to communicate strategic imperatives of the ECGBB.

-1 Due to a lack the lack of capacity in the Unit, the SMS Division has determined that only three newsletters should be developed instead of five for the 2013/14 financial year.

Mr. M. Duma

Number of platforms to profile the work of the ECGBB (print, electronic and general events platforms)

+2 All targets that appear to be over-achievement, but in real terms may be deviation from planned targets will be avoided in the future as they impact negatively on budget baselines.

Mr. M. Duma

Socio Economic Development

Number of MOUs developed between the ECGBB & the Licensees Trusts.

-5

The SED will incorporate the contents of the MOUs to conditions of licence so that one source document will serve as a guiding document to achieve the desired outcomes to work with Trusts established in terms of licence conditions. Mr. D. Mzonke

Number of functional Trusts supported in terms of licence conditions.

-2 The SED Budget sub-programme will continue working with the functional and existing Trusts as two trusts are not operational because of lack of funding.

Information Management and Technology

Number of Information Technology Systems approved.

-1 An ICT Manager has been appointed by the organisation and the planned target that was not achieved during the 2012/13 will be implemented in 2013/14 financial year.

Mr. K. Chetty

Changes to planned targets

There were no changes on the performance indicators that were made during the financial year of reporting.

35

2.3.2 Budget Programme 2: Gambling Regulation and Consumer Protection

2.3.2.1 Purpose of the Programme

The purpose of this programme is to implement the ECGBB Act and other statutory mandates through conducting compliance,

auditing, licensing, investigations, gaming control and law enforcement as well as protecting and educating consumers and the public

about responsible gambling.

2.3.2.2 Sub-programmes

• Investigation & Licensing Administration

• Law enforcement and gaming control

• Audit and compliance services

• Consumer protection and public education

2.3.2.3 Strategic objectives

• To conduct investigations and regulatory functions in an objective manner to ensure that the decision-making processes are

impeccable and watertight to avoid any possible legal challenges.

• To protect the public interest and the licenced operators from unfair and illegal competition.

2.3.2.4 Key Performance measures, their targets and actual results for 2012/13 Financial Year


To conduct investigations and regulatory functions in an objective manner to ensure that the decision-making processes are impeccable and

watertight to any possible legal challenges; and

To protect the public interest and the licenced operators from unfair and illegal competition.

INVESTIGATION AND LICENSING ADMINISTRATION

Performance

Indicator

Actual

Achievement

2011/2012

Planned Target

2012/2013

Actual

Achievement

2012/2013

Variance

from2011/2012 to

2012/2013

Deviation from

planned target for

2012/2013


Percentage of

Licence applications

Investigated.

N/A

100%

(94)

94%

(88) No Variance

(6%)

-6

Priority was given to the

bingo licensing process.

Due to the magnitude of

applications received all the

available resources were

utilised for this purpose.

Percentage of

Certification of

Suitability

Applications

Investigated.

N/A

100%

(3)

100%

(3) No Variance No Deviation

Percentage of public

hearing sessions

held.

N/A

100% (5)

100% (5)

No Variance

No Deviation

Percentage of

Employee

Registration

Certificates issued.

N/A 100%

(561)

100%

(580) No Variance +19

The amount on the APR was

incorrectly shown as 561

instead of 580.

36

SUB-PROGRAMME: LAW ENFORCEMENT AND GAMING CONTROL


To protect the public interest and the licenced operators from unfair and illegal competition








Number of operations / raids (“Sweeps”) conducted on illegal gambling in the province.

1 5 5 +4 No Deviation

Number of MOUs developed with SAPS, SARS, FIC and NPA.

N/A

4 1 No Variation -3

Numerous attempts have been made to try and secure meetings with the relevant institutions to no avail.

Percentage of gaming devices registered.

N/A

100% (867)

100% (867)

No Variation No Deviation

Number of Casino Gambling Devices tested.

1159 494 1 293

No Variation No Deviation

+ 134

+799

Licensees requested the ECGBB to test 799 devices over and above the planned target due to casino developments in Zone 1 and 2. The costs were incurred by licensees.

SUB-PROGRAMME: AUDIT AND COMPLIANCE SERVICES


To ensure compliance and adherence to bid commitments, licence conditions, legislation and regulations prior to and after the commencement of the operations.








Number of Compliance Audits Conducted


Percentage of Gambling Devices Verified

100% 100% (546) 100% (546) No Variance No Deviation

Percentage of Employees in the Gaming Industry Verified

N/A

100% (407) 100% (408) No Variance No Deviation

Number of Revenue Audits Conducted


Number of FICA compliance audits conducted

N/A 11 9 No Variation -2

The final reports for two audits were concluded after year end. The report for Boardwalk was concluded within the year but erroneously omitted from the POE

Number of Licensees AFS Analysed


Number of environmental audits conducted

100% 4 0 -4 -4

There was a delay in concluding the tripartite Service Level Agreement (SLA) which was resolved in the last quarter suitable dates

37

SUB-PROGRAMME: AUDIT AND COMPLIANCE SERVICES


To ensure compliance and adherence to bid commitments, licence conditions, legislation and regulations prior to and after the commencement of the operations.








could not be secured with the appointed service provider to complete the audits by year end.

Number of SED audits conducted in terms of Licence Bid Commitments

100% 6 4 No Variation -2

The audit for Queens Casino was conducted in conjunction with a compliance audit. The audit for Cradock was only concluded post year end.

SUB-PROGRAMME: CONSUMER PROTECTION AND PUBLIC EDUCATION


To educate the public on gambling related issues








Gambling Consumer Protection Strategy Approved.

N/A 1 1 No Variation No Deviation

Number of Sessions to Communicate the Approved Gambling Consumer Protection Strategy.


Number of Responsible Gambling Campaigns Conducted Accordingly.

6 3 6 No Variation +3

The additional three targets achieved was a result of invitations received from different public sector organisations. The ECGBB was invited to conduct more awareness programmes on responsible gambling during the last quarter of the financial year. There were no additional budget implications

Number of seminars hosted on Problem Gambling and Consumer Protection


38

Summary of payments by sub-programme of Budget Programme Two:


Over / (Under)


Over / (Under)

Expenditure

R'000 R'000 R'000 R'000 R'000 R'000

Licensing and

Investigation 4,917 6,015 1,097 - - -

Law Enforcement and

Gaming Control 2,617 2,479 (138) - - -

Audit and Compliance 3,034 2,765 (270) - - -

Consumer Protection and

Public Education 6,048 4,027 (2,021) - - -

Total 16,617 15,285 (1,331) - - -

2012/13 2011/12


Licensing and investigation

o Higher evaluation and hearing costs as a result of the Bingo Licensing process. These costs are however recoverable and

shown under recovery income, therefore having a nil effect on surplus / deficit.

Consumer Protection and Public Education

o There was an under spend on employee costs

o The grant relating to consumer protection was received in December 2012 which meant that the Board only had three

months to implement this programme.

Expenditure was not budgeted for on a sub-programme level in the previous year.

39

Strategies to overcome areas of underperformance by Budget Programme Two:

BUDGET SUB-PROGRAMME

PERFORMANCE INDICATOR 2012/13 TARGET : VARIANCE (-) OR DEVIATION (+)

STRATEGY TO OVERCOME UNDERPERFORMANCE (VARIATION) AND DEVIATION FROM THE PLANNED TARGETS

RELEVANT OFFICIAL

Investigation and Licensing Administration

Percentage of Licence applications Investigated. (-6%)

-6

The Board is embarking on having window periods for each type of licence to be issued; upon which each type of licence will have its own dedicated period.

Mr. M. Vanda

Percentage of public hearing sessions held. (-6%)

-6

The Board is embarking on having window periods for each type of licence to be issued; upon which each type of licence will have its own dedicated period.

Mr. M. Vanda

Law Enforcement And Gaming Control

Number of MOUs developed with SAPS, SARS, FIC and NPA

-3

Due to non availability of these officials, the board has investigated an option of utilising a creditable organisation (INDECO) to provide the Board with the necessary probity of information. This has been standard practice with all other gambling Boards utilising these institutions. Mrs. B.

Mnqokoyi Number of Casino Gambling Devices tested.

+ 799

Licensees will be engaged to submit their projections regarding their need for the ECGBB to test their devices. These projects will be used as reporting indicators rather than forward looking planning indicators.

Audit and Compliance Services

Number of environmental audits conducted.

-4 The respective Service Level Agreements concluded are for a period of three years.

Ms. H. Adonisi

Consumer Protection and Public Education

Number of responsible gambling campaigns conducted accordingly

+3

All targets that appear to be an over-achievement but which are a deviation from planned targets in real terms will be avoided in the future as they impact negatively on budget baselines.

Mrs. B. Mnqokoyi


There were no changes on the performance indicators that were made during the financial year of reporting.

40

2.3.3 Budget Programme 3: RESEARCH AND DEVELOPMENT

2.3.3.1 Purpose of the programme

The purpose of this programme is to build a strong foundation of valid and reliable empirical research to inform operational, policy

advisory and public interest activities such as consumer protection.

2.3.3.2 List of sub-programmes

• Empirical research on gambling industry and consumer protection

• General and ad hoc surveys

2.3.3.3 List of strategic objectives

• To guide the generation of information in the Gambling industry.

• To deliver a quality customer-oriented service to the public, licensees and other stakeholders.

2.3.3.4 Key Performance measures, their targets and actual results for the 2012/13 Financial Year


To guide the generation of information about the gambling industry; and

To deliver a quality customer-oriented service to the public, licensees and other stakeholders

EMPIRICAL RESEARCH ON GAMBLING INDUSTRY








Research and Development Strategy approved by the Board of Directors of ECGBB.


Number of Research work Conducted by ECGBB.


The bidder recommended by the Bid Committee to undertake the second research project was not signed off and the assignment could not proceed as planned.

Research Database of the ECGBB Established


Number of MOUs developed to strengthen the Research Agenda of the ECGBB.


The additional MOU achieved was a result of a new stakeholder identified to partner with the ECGBB. There were no budget implications.

GENERAL AND ADHOC SURVEYS



Number of Surveys Conducted by ECGBB.

N/A 3 0 No Variance -3 All surveys were completed in the first quarter of 2013/14.

41

Summary of payments by sub-programme of Budget Programme Three:


Over / (Under)


Over / (Under)

Expenditure

R'000 R'000 R'000 R'000 R'000 R'000

Empirical Research 572 300 -272 - - -

General and Adhoc

Surveys 269 564 295 - - -

Total 841 864 24 - - -

2012/13 2011/12


Empirical Research

o Programme 3 did not meet its target of completing two research projects during the year. This resulted in a cost saving.

General and Ad hoc Surveys

o Two surveys conducted during the year costing more than anticipated.

Programme 3 is new to the ECGBB in the year under review. There is therefore nothing to report on for the previous year.

Strategies to overcome areas of underperformance by Budget Programme Three:

BUDGET SUB-

PROGRAMME

PERFORMANCE INDICATOR 2012/13 TARGET :

VARIANCE (-) OR

DEVIATION (+)

STRATEGY TO OVERCOME

UNDERPERFORMANCE (VARIATION) AND

DEVIATION FROM THE PLANNED

TARGETS

RELEVANT

OFFICIAL

Empirical Research on

Gambling Industry

Number of Research work

Conducted by ECGBB. -2

The post testing of responsible gambling

messages that was planned during the

2012/13 financial year will be considered

during the 2013/14 financial year.

Mr. M. Duma

General and Ad Hoc

Surveys

Number of Surveys Conducted by

ECGBB. -3

The pre-opening of Zone 4 Casino Survey will

be conducted when a final determination

regarding the Request for Proposal for the

Licence is finalised and advertised to

prospective bidders.

Mr. M. Duma


There were no changes to the performance indicators that were made during the financial year of reporting

42

3. Part C: Report on Corporate Governance

3.1 Introduction

Corporate governance embodies processes and systems by which public entities are directed, controlled and held to account. In addition

to legislative requirements based on a public entity‟s enabling legislation, and the Companies Act, corporate governance with regard to

public entities is applied through the precepts of the Public Finance Management Act (PFMA) and run in tandem with the Protocol on

Corporate Governance, which encapsulates the principles contained in the King‟s Report on Corporate Governance.

Parliament, the Executive and the Boards of the public entities are responsible for corporate governance.

3.2 Portfolio Committees

The Eastern Cape Provincial Legislature exercises its role through evaluating the performance of the ECGBB by interrogating its annual

financial statements and other relevant documents which may be tabled as well as any other documents tabled from time to time.

The Standing Committee on Public Accounts (SCOPA) reviews the annual financial statements and the audit reports of the external

auditor.

The Portfolio Committee on Economic Development, Environmental Affairs and Tourism exercises oversight over the service delivery

performance of the ECGBB and, as such, reviews the non-financial information contained in the annual reports of the ECGBB. As such, it

is concerned with service delivery and enhancing economic growth.

NO DATE BUSINESS OF MEETINGS AND ENGAGEMENTS

1 19 April 2012 Presentation of the 2012/13-14/15 Annual Performance Plan of the ECGBB

2 5-6 June 2012 Portfolio Committee visits ECGBB sites in PE

3 25 July 2012 Committee debate the casino visit report

4 8 November 2012 Consideration of the Annual Report and Financial Oversight Reports

3.3 Executive Authority

Oversight by the Executive Authority rests largely on the prescripts of the PFMA. The PFMA governs/gives authority to the Executive

Authority for oversight powers.

The Executive Authority has the power to appoint and dismiss the Board of a Public Entity. The Executive Authority must also ensure that

the appropriate mix of executive and non-executive directors is appointed and that directors have the necessary skills to guide the Public

Entity.

Reports submitted to the Executive Authority during the year under review:

NO DATE REPORTS SUBMITTED TO THE EXECUTIVE AUTHORITY

1 30 July 2012 2012/13 First Quarter Performance Report

2 31 August 2012 2011/12 Annual Financial Statements / Annual Report

3 30 September 2012 2013/14 Annual Budget

4 23 October 2012 2012/13 Second Quarter Performance Report

5 23 October 2012 Six Months Oversight Report and Six Months Performance Information Report

6 22 January 2013 2012/13 Third Quarter Performance Report

7 29 April 2013 2012/13 Fourth Quarter Performance Report

44

3.4 The Board

The purpose of the Board is to regulate the conduct of its business by the Board, in accordance with the principles of good Corporate

Governance, the ECGBB Act, and the PFMA. The Board Charter sets out the specific responsibilities to be discharged by the Board

members collectively as well as in their individual roles.

Roles and responsibilities of the Board:

The primary responsibilities of the Board are as follows:

• Giving strategic direction to the organisation.

• Identifying key risk areas and key performance indicators of the organisation‟s business

• Monitoring significant investment, regulatory and project related decisions

• Considering significant financial applications.

• Reviewing the performance of management against business plans, budgets and Corporate Governance standards; and

• Ensuring that its obligations in terms of the relevant legislation, including the PFMA are effectively discharged.

3.5 Board Charter

As recommended by the King Code of Governance Principles, the Board has a charter setting out its responsibilities, which should be

disclosed in its annual report. At a minimum, the charter should confirm:

• The Board‟s responsibility for the adoption of strategic plans;

• Monitoring of operational performance and management;

• Determination of policy processes to ensure the integrity of the Public Entity risk management and internal controls; and

• Communication policy, as well as director selection, orientation and evaluation.

Progress made regarding compliance with the charter

The objective of the Board Charter is to ensure that all Board members, employees of the Board and other stakeholders are aware of the

duties and responsibilities of the Board and has the basis upon which it interacts with Management, in giving effect to its obligations.

The Board Charter ensures that Board members are responsible for the full and effective control of the Board and assumes responsibility

for the following:

• Monitoring of the Management of the organisation and the implementation of its plans and strategies;

• Ensuring a comprehensive system of policies and procedures remains operative;

• Ensuring ethical behaviour;

• Reserving specific powers to the Board where considered appropriate or necessary;

• Acting responsibly toward stakeholders; and

• Ensuring compliance with Corporate Governance principles and relevant legislation.

The Board Charter recognises that the two key and distinct tasks associated with the conduct of the Board‟s affairs are the running of the

affairs of the organisation and the executive responsibility for the conduct of the organisations‟ business.

45

3.6 Composition of the Board

The Honourable MEC for Economic Development and Environmental Affairs appointed a new Board of Directors who commenced their

duties on 1 April 2011. The Board consists of 8 non-executive directors. The Board is:

• Adv. N Mayosi (Chairperson)

• Mr O Mtati (Deputy Chairperson)

• Miss Y Makhasi

• Mr P Voges

• Mr Z Nomafu

• Mr M Vena

• Mr V Tshangana

• Ms P Nqakula

Composition of the Board continued:

Name Designation Date

Appointed

Date

Resigned Qualifications

Area of

Expertise

Board

Directorships

(List Entities)

Other Committees

No. of

meetings

attended

Adv. N.

Mayosi Chairperson 01 April 2011 N/A

B. Proc LLB, LLM

Advocate of the

High Court.

Law None None 22

Mr. O Mtati Deputy

chairperson 01 April 2011 N/A B.A, B. Juris Entrepreneurship

Director and a

shareholder in RB

and Associates.

Compliance and

Licensing, Human

Resources and

Remuneration

24

Miss Y

Makhasi Member 01 April 2011 N/A

M. Public Policy

and Management Management

Madison

Investments

Human Resources

and Remuneration 10

Mr. P Voges Member 01 April 2011 N/A

B.Comm(Hons), M

Comm

(Economics)

Environment

Development None

Compliance and

Licensing, Finance 20

Mr. Z Nomafu Member 01 April 2011 N/A B.Compt(Hons),

M.Comm, CA(SA)

Chartered

Accountancy None

Finance, Audit and

Risk 20

Mr. M Vena Member 01 April 2011 N/A B. Juris Community

Interests None

Compliance and

Licensing, Human

Resources and

Remuneration

19

Mr. V

Tshangana Member 01 April 2011 N/A

B.Proc, LLM,

Admitted Attorney Law / Treasury

Tshangana

Attorneys Finance 17

Ms. P

Nqakula Member 01 April 2011

B.Soc Sci, P.G Dip

International

Studies

Safety None Compliance and

Licensing 14

Appointment of Board Directors

The Board is established as a statutory body in terms of the Gambling and Betting Act, 1997 (Act No. 5 of 1997) (Eastern Cape) and is listed as

a provincial public entity in Schedule 3C of the Public Finance Management Act, 1999 (Act No. 1 of 1999). The Board members act as the

accounting authority in terms of the PFMA. The accounting authority is responsible for determining strategic direction and policy, and for the

monitoring of operational performance and management.

The current board of directors for the ECGBB was appointed in April 2011 by the Hon. MEC for Economic Development, Environmental Affairs

and Tourism and all assumed responsibilities in April 2011 following a rigorous and independent process headed by a retired judge.

46

3.7 Committees

The Board has four sub-committees. They are:

• Audit and Risk Committee

• Compliance and Licensing Committee

• Finance Committee

• Human Resources and Remuneration Committee

Roles and Responsibilities of Committees

Audit and Risk Committee

The audit and risk committee assists management in fulfilling its oversight responsibilities for the financial reporting process, the system of

internal control, the audit process and ECGBB's process for monitoring compliance with laws and regulations and the code of conduct. Unless

otherwise stated, the Audit Committee performs an advisory role to the ECGBB. The Audit Committee is accountable to the Accounting

Authority to properly consider and evaluate any matter that it has to deal with or which has been referred to it.

Finance Committee

The finance committee is formed to review and recommend the annual financial statements, and any other publicly released financial statement,

of the Board; any change in the Board's financial year or tax year; any material change in the ECGBB accounting policies other than changes

which bring the ECGBB accounting policies in conformity with Generally Recognised Accounting Principles (GRAP); the approval of any

expenditure beyond the budgeted limits and perform such other functions that from time to time may be assigned to it by the Board.

Human Resources and Remuneration Committee

The purpose of the human resources and remuneration committee is to:

• Advise and make recommendations to the Board on Human Resources including but not limited to the organisational structure skills

and development and policies and practice;

• Ensure that the Chief Executive Officer, Senior Managers and the Staff of the Board receive reasonable and fair rewards for their

individual and combined contributions to the overall performance of the Board; and

• Make recommendations to the Board on the remuneration of members.

Compliance and Licensing Committee

The function of the compliance and licensing committee is to:

• consider and recommend to the Board licensing investigation reports, investigation methods, the licensing, regulatory compliance,

revenue audit processes and technology;

• conduct hearings, enquiries and evaluations on any matter presented before it; impose fines and issuing of warnings to licensees on

any non-compliance matter before it;

• monitor adherence to the internal control procedures, compliance plans and bid deliverables by the licences;

• review and enforce the findings relating to amongst others, special investigations, illegal gambling activities, cheating activities,

excluded persons and patron disputes; and perform such other functions that from time to time may be assigned to it by the Board.

• consider the outcome of the legislative review process and make recommendations to the Board in respect thereof.

Number of meetings held during 2012/13 financial year:

Committee No. of meetings held No. of members Names of members

Audit and Risk 5 4 Ms L Smith; Mr Z Nomafu

Mr P White; Mr H Marsberg

Compliance and Licensing 9 4 Mr P Voges; Mr M Vena

Ms P Nqakula; Mr O Mtati

Finance Committee 6 3 Mr Z Nomafu; Mr P Voges

Mr V Tshangana;

Human Resources and

Remuneration 5 3

Ms Y Makhasi; Mr M Vena

Mr O Mtati

47

3.8 Remuneration of board members

Board remuneration is payable as follows:

• Chairperson – R12 000 per day and R12 000 per month retainer

• Deputy chairperson – R10 000 per day

• Ordinary board member – R8 500 per day

• Committee members appointed as representatives of the respective provincial departments are not paid for board meetings; except

in exceptional circumstances.

Name Remuneration (R) Other re-imbursements (R) Total (R)

Adv N Mayosi 629 000 3 129 632 129

Mr M Vena 378 450 9 400 387 850

Mr O Mtati 616 000 3 981 619 981

Mr P Voges 382 700 4 936 387 636

Ms Y Makhasi 299 000 11 615 310 615

Mr Z Nomafu 401 850 10 000 411 850

Mr V Tshangana 144 500 - 144 500

Ms P Nqakula 144 500 - 144 500

3.9 Risk management

Nature of risk management

The ECGBB has adopted an Enterprise Risk Management which is a continuous, proactive and systematic process, effected by the

Board, Executive Management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential

events that may affect the ECGBB, manage risk to be within its risk appetite, and further provide reasonable assurance regarding the

achievement of the ECGBB‟s objectives.

Risk management strategies to identify risks and manage those risks

• The identification and management of risks within the ECGBB can be outlined in terms of the following processes:-

• A methodology and framework for Enterprise Risk Management is defined and agreed upon by the Organisation, i.e. the Board and

the Management of the ECGBB.

• Gap analysis of the entity‟s Enterprise Risk Management process, is conducted at regular intervals, taking into account the Auditor-

General reports.

• Annual risk management assessments and risk assessments for all major changes and incidents are facilitated including accidents,

purchases of capital equipment, restructuring of operational processes ;

• Implementing a risk identification process with the ECGBB‟s targets and objectives aligned together.

• A system to facilitate risk monitoring and risk improvement is developed and implemented on a quarterly basis;

• Decisions regarding mitigation for every key risk facing the ECGBB are documented in the risk register of the ECGBB.

• Solutions and mitigation strategies for common risks are negotiated collectively by the Management of the ECGBB.

• Risk management training is conducted at appropriate levels within the entity to inculcate a risk

• Risk registers for all functional areas at strategic, tactical and operational levels is also conducted

• A risk management framework and methodology is communicated to all employees;

• Necessary risk management documentation is developed in respect of the risk management process;

• Validation that enterprise risk management is functioning in all functional areas and that all significant risks are being recognised and

effectively managed in a timely manner;

• Communication with the audit and risk committee regarding the status of enterprise risk management;

• Reports to the Audit and risk committee regarding the progression of enterprise risk management and its implementation, as well as

the identification of significant and material risk exposures and recommendations across the ECGBB;

48

Risk assessments

Risk assessment is the determination of quantitative or qualitative value of risk related to a concrete situation and a recognized threat.

Quantitative risk assessment requires calculations of two components of risk, the magnitude of the potential loss and the probability (p)

that the loss will occur.

Risk assessment allows an entity to consider how potential events might affect the achievement of objectives. Management assesses

events by analysing the likelihood and its impact. Below here is a process that is utilised by the ECGBB to assess its risks, the

magnitude and potential loss.

Impact Parameters:

Sev

erity

R

anki

ng

Continuity of Service Delivery Reputation/ Safety Strategic Mandate

Cri

tica

l 5

Risk event will result in widespread and lengthy reduction in continuity of service delivery to customers of greater than 48 hours

Major environmental damage Serious injury (permanent disability) or death of personnel or members of the public Major negative media coverage

Critical outcomes or missed opportunities that are of critical importance to the achievement of the objectives. Will lead to non- achievement of objectives and or collapse of business activity

Maj

or

4

Reduction in service delivery or disruption for a period ranging between 24 and 48 hours over a significant area

Significant injury of personnel or public. Significant negative media coverage

Major outcomes or missed opportunities that are likely to have a relatively major impact on the ability to meet objectives. It may also lead to cost increase greater than 20%

Mo

der

ate

3

Reduction in service delivery or disruption for a period between 8 and 47 hours over a regional area

Lower level safety or health impacts. Negative media coverage.

Moderate outcomes or missed opportunities that are likely to have a relatively moderate impact on the ability to meet objectives and may also lead to cost increase greater than 10%

Min

or

2

Brief local inconvenience (work around possible). Loss of an asset with minor impact on operations

Little environmental, safety or health impacts Limited negative media coverage.

Minor outcomes or missed opportunities that are likely to have a relatively minor impact on the ability to meet objectives and may lead to cost increase greater than 10%

Insi

gn

ific

ant

1

No impact on business or core systems No environmental, safety or health impacts and/or negative media coverage.

Insignificant outcomes or missed opportunities that are likely to have an insignificant impact on the ability to meet objectives and may have minimal or no impact on cost

Likelihood Parameters

Please note: Risk rating = impact X likelihood

Probability Factor

Measurement Criteria Qualification Criteria Rating

Common The risk is already occurring, or is likely to occur more than once within the next 12 months

The risk is almost certain to occur in the current circumstances

5

Likely The risk will easily occur, and is likely to occur at least once within the next 12 months

More than an even chance of occurring 4

Moderate There is an above average chance that the risk will occur at least once in the next 3 years

Could occur quite often 3

Unlikely The risk could easily occur, and is likely to occur at least once within the next 12 months

Small likelihood but could happen 2

Rare The risk is already occurring, or is likely to occur more than once within the next 12 months

Not expected to happen - Event would be a surprise 1

49

http://en.wikipedia.org/wiki/Quantitative_property

http://en.wikipedia.org/wiki/Qualitative_data

http://en.wikipedia.org/wiki/Threat

http://en.wikipedia.org/wiki/Risk

SUMMARY OF THE TOP TEN RISKS AS PER RISK REGISTER DURING 2012/13 FINANCIAL YEAR

No Risk Description Implications for Business Risk Mitigation Plans Risk Owners: Budget Sub-

programmes

1 Non compliance by licensees with

licence conditions

Under collection of revenue, non-

compliance with licence conditions

Continuous monitoring of compliance

with licence conditions and imposition

of fines and penalties

Gambling Regulation and Consumer

Protection

2 Out-dated legislation Challenges from licensees in the

form of complaints or litigation

Submit annual updates of legislation to

DEDEAT

Legal Services and Board Secretariat

3 Inadequate funding to achieve

overall mandate

Mandate not accomplished Engage DEDEAT and Provincial

Treasury annually to allocate more

funding

Office of the Chief Executive Officer

4 Incorrect information supplied by

licensees resulting in inaccurate

information maintained in GIMS

database

Under collection of gambling fees Annual verification audits and the

database is monitored monthly


Protection;

5 Challenges with implementation of

integrated performance

management system

Organisation will not achieve its

objectives

Monthly performance centre meeting All Budget Sub-Programmes

6 Not keeping abreast with industry

developments

Challenges from licensees in the

form of complaints or litigation

Training on industry updates annually,

attendance at compliance fora ( GRAF,

IAGRA, CEO, Legal & Compliance, IT ,

HRBF, Law enforcement, Gambling

Expo)


Protection;

7 Non compliance with various

sections of the Provincial

Gambling Act e.g. revenue

collection.

Failure to effect ECGBB mandate The database is monitored monthly by

Compliance and licensing division and

bi annually audit by internal audit.


Protection;

Financial Management

8 Merger between Liquor Board and

Gambling Board

Possible disruption of operations Beyond Management control,

dependant on MEC

Office of the Chief Executive Officer

9 Failure to deliver on ECGBB

socio-economic development

(SED) initiatives due to external

dependencies or parties (not

delivering)

Socio-economic development

(SED) initiatives may not be

achieved

Annual monitoring of compliance with

trust initiatives


Protection

Socio Economic Development

10 Retention and succession strategy

not in place or inactive

Experienced staff leaving the

organisation , inability to retain

staff resources

Pending approval of the Retention and

Succession Strategy

Human Resources Management and

Development

3.10 Internal Control

Internal controls are tested and verified by the work of internal audit. During the year, the following areas were covered by internal audit:

• Compliance Revenue – review processes followed by Programme 2 and confirm compliance of process with the Gambling Act and

Regulations

• Revenue – Finance related controls around the billing and recoveries process

• Performance Reporting – effectiveness of internal controls relating to quarterly performance reports.

The reports on the above sections highlighted areas in which controls are either inadequate or not functioning effectively. The Board

makes use of an audit tracking document to assist in keeping track of these issues following progress in instituting corrective measures.

The audit tracking document is reported to management and the Board members on a monthly basis.

50

3.11 Internal Audit and Audit Committees

The audit and risk committee assists management in fulfilling its oversight responsibilities for the financial reporting process, the system

of internal control, the audit process and ECGBB's process for monitoring compliance with laws and regulations and the code of conduct.

Unless otherwise stated, the Audit Committee performs an advisory role to the ECGBB. The Audit Committee is accountable to the

Accounting Authority to properly consider and evaluate any matter that it has to deal with or referred to it.

Name Qualifications Internal or external Date appointed No. of meetings

attended

Ms L Smith Chartered Accountant External 01 April 2011 5

Mr Z Nomafu Chartered Accountant External 01 April 2011 4

Mr P White Chartered Accountant External 01 April 2011 5

Mr H Marsberg Bachelor of Commerce External 01 April 2011 5

The internal audit function is outsourced to an external service provider. During the reporting period the three-year contract for internal audit

came up for renewal and a new company won the bid for the next three years.

3.12 Compliance with laws and regulations

In executing its responsibilities, the ECGBB complies with the following laws, codes and regulations:-

• Constitution of the Republic of South Africa. The ECGBB ensures that the bill of rights is observed in respect of all dealings with its

stakeholders and employees

• National Gambling Act of 2004 and the Eastern Cape Gambling and Betting Act5 of 1997. The ECGBB performs all its functions in

compliance with the procedural prescripts set out in these two Acts.

• The PFMA 1of 1999 and Treasury Regulations with respect to Strategic and Budget Planning, Financial Management and Internal

Control Systems.

• The Division of Revenue Act with respect to disbursement and accountability of funds transferred to other organisations.

• Labour Relations Act/1995;

• The Basic conditions of employment Act 75/1997 and the Employment Equity Act 55 of 1998. All employees within the ECGBB

observes the procedural prescripts set out in the legislation listed above.

• Preferential Procurement Policy Framework Act. The ECGBB ensures that all its supply chain processes are undertaken in terms of

the above Act.

• Broad Based Black Economic Empowerment Act and the Codes of Good Practice

Over and above the aforementioned pieces of legislation and regulations, the Board has developed its own policies and; plans to guide

and regulate its functionality. These include among others:

• Delegation of authority policy

• Supply Chain Policy

• Asset Management Policy within the Finance Policy

• Human resource Management Policy

• Fraud Prevention Plan

• Risk Management Framework

• Performance Management Policy

• Disaster Management Policy

• Travel and Subsistence Policy

51

3.13 Fraud and corruption

The Board makes use of a Fraud Prevention Policy which is reviewed annually by the Audit and Risk Committee as well as the

Board. The policy is work shopped to all new staff during the induction process.

The policy seeks to define the term Fraud and provide employees with steps to follow should they suspect fraudulent activities. The

policy sets out the reporting lines to be followed should an employee wish to report a possible fraudulent activity. The Board also

makes use of a Fraud Hotline number should the employee wish to report fraudulent activity anonymously.

3.14 Minimising conflict of interest

The Board manages conflict of interest by including a standing agenda item for all Board and Committee meetings in which members

are required to state any conflicts of interest. On an annual basis the Board and Committee members are also required to sign a

detailed declaration of interest document.

3.15 Code of conduct

The Code of Conduct consists of statutory principles which inform the general code of conduct and ethics of all members of the

ECGBB Board and its employees as laid down in the ECGBBB Act.

The Code is applied with due consideration to the following entrenched provisions:

• All members of the Board are required to declare any conflict of interest as provided for in the ECGBB Act

• Employees may not have controlling interest or any financial interest in any gaming activity

• Board and Employees shall not participate in any gaming or betting in the Province except in the performance of his or her duties in

terms of the Act

• Board member and employees and their families may not accept any donation, reward or other benefit directly or indirectly from an

applicant or licence holder except within the recognised exceptions for in the Act

3.16 Health, Safety and Environmental issues

• No Health, Safety and Environment issues were reported during the year under review

• One policy and emergency evacuation plan was developed in the year under review

• A risk assessment was conducted by the Buffalo City Metro Municipality, who reported back to the entity on the findings, along with

recommendations.

52

3.17

S

ocia

l Res

pons

ibili

ty

Bel

ow i

s a

sum

mar

y of

the

EC

GB

B c

ontr

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ion

to t

he p

opul

atio

n of

the

Eas

tern

Cap

e P

rovi

nce

durin

g th

e re

port

ing

year

in

ter

ms

of m

eetin

g its

soc

ial

resp

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bilit

y as

gui

ded

by i

ts S

ocio

-Eco

nom

ic

Dev

elop

men

t Pol

icy

and

the

Eas

tern

Cap

e A

nti-

Pov

erty

Str

ateg

y ch

ampi

oned

by

the

Eas

tern

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e D

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tmen

t of S

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l Dev

elop

men

t and

Spe

cial

Pro

gram

me.

NO

. O

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AN

ISA

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TR

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UP

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53

3.18 Audit and Risk Committee Report

Report of the Audit and Risk Committee

We are pleased to present our report for the financial year ended 31 March 2013.

Audit and Risk Committee Members and Attendance:

The audit committee consists of the members listed hereunder and should meet at least four times a year as per its approved terms

of reference. During the current year 5 meetings were held.

Name of Member Number of Meetings Attended

L Smith (Chairperson) CA(SA), RA 5

P White CA(SA) 5

H Marsberg, B.Com 5

Z Nomafu (Director and Audit Committee Member) CA(SA) 4

The audit committee is considered to have the correct experience, qualifications and skills to carry out their responsibilities

effectively.

Audit and Risk Committee Responsibility

We report that we have adopted appropriate formal terms of reference in our charter in line with the requirements of Section 38(1)

(a) of the Public Finance Management Act, No. 1 of 1999 and Treasury Regulation 3.1. We further report that we conducted our

affairs in compliance with this charter.

The effectiveness of internal control

Based on the information provided to the Audit and Risk Committee by both Management and Internal audit, it would appear that the

system of internal control was effective for the year under review.

Evaluation of Financial Statements

We have:

Reviewed and discussed the annual financial statements which have been recommended to the Accounting Authority to

be submitted to the Auditor-General for audit purposes at 31 May 2013.

Reviewed the Auditor-General South Africa‟s management report and management‟s response thereto in respect of the

2012 year. Due to the timing of this report, no matters have been communicated by the Auditor General to the audit

committee in respect of the 2013 financial year.

Reviewed the entity‟s compliance with legal and regulatory provisions.

Reviewed the performance information to be approved by the Accounting Authority.

Reviewed significant adjustments resulting from the audit.

Internal Audit

The Internal Audit function is outsourced to a service provider. During the year, the service provider‟s contract came to an end and a

new service provider was appointed. This did impact on the smooth audit process. However, the plan was met for the year.

Risk Management

The Audit and Risk Committee has ensured that the Risk Management framework was prepared and approved during the financial

year. Risks were identified during a formal risk identification process and the Chief Executive Officer has been appointed as the Risk

Officer for the Entity.

54

Auditor-General South Africa

We concur with and accept the Auditor-General South Africa‟s report on the annual financial statements, and are of the opinion that

the audited annual financial statements should be accepted read together with the report of the Auditor-General South Africa.

Loren Smith

Chairperson of the Audit and Risk Committee

31 July 2013

55

4. Part D: Human Resources

4.1 Value of Human Capital in the ECGBB

Human Capital plays an increasingly important role in the organisation‟s success. Success goes to organisations that effectively manage

their human capital. The organisation has placed tremendous value on its human capital by creating strategies, policies and practices that

remove barriers to performance resulting in motivated and satisfied human capital.

The implementation of the Human Resource Management Strategy will play a vital role in the achievement of the organisation's overall

strategic objectives and its mandate which is to regulate the gambling industry and protection of the public in the province.

4.2 Overview of HR Matters at the ECGBB

Employment Equity:

The Organisation‟s Employment Equity Profile has been aligned to that of the National Legislative Framework as follows:

Human Resources Statistics Category

Description 2012 /2013

African Male

Coloured Male

Indian Male

White Male

African Female

Coloured Females

Indian Female

White Female

Foreign Males

Foreign Female

EQUITY

Provincial Economic Active Population Percentages

39.3% 5.9% 0.8% 5.6% 37.8% 4.8% 0.6% 5.4% 0.0% 0.0%

Actual Employee numbers

12 1 1 4 24 1 0 1 0 0

Disabled Employees

0 0 0 0 0 0 0 0 0 0

ECGBB Workforce Percentages

28.6% 2.4% 2.4% 9.3% 57.1% 2.7% 0.0% 2.4% 0.00% 0.00%

Training and Development:

Staff attended 21 Training Interventions during the year under review.

Occupational Health & Safety:

The organisation places an emphasis on the Health and Safety of its employees. With this in mind the organisation has developed a

Health & Safety Policy to guide the Management of Health and Safety in the Workplace.

Recruitment and Selection

During the year under review the organisation placed emphasis on Recruitment of Talent into vacant positions. The vacancy rate

decreased from 29.5% during the 2011/12 financial year to 8.7% during 2012/13.

4.3 HR Priorities for the year under review and the impact of these priorities

• Developing a Human Resources Management Strategy to support the human capital aspect in the delivery of the organisation‟s

objectives.

• Creating sound employee relations and open communication channels by disseminating of information to all employees in a

structures and timely manner.

57

• Creating employee engagement to achieve business objectives.

• Promoting Employee Well-being

4.4 Workforce planning and key strategies to attract and recruit a skilled and capable workforce

The Organisation has developed the following to attract and recruit a skilled and capable workforce:

• Recruitment and Selection Policy

• Remuneration and Reward Policy

• Employee performance management framework

The Organisation has developed an Integrated Performance Management Policy. This Policy ensures that the organisations strategic

objectives are translated into operational and performance objectives that are cascaded at every level (from top to bottom throughout the

organisation) and inform the manner in which both the institution and its employees function. The performance is then measured quarterly

to assess whether the employees are moving toward the correct direction.

4.5 Employee performance management framework

The organisation has developed an Integrated Performance Management Policy. This Policy ensures that the organisations strategic

objectives are translated into operational and performance objectives that are cascaded at every level (from top to bottom throughout the

organisation) and inform the manner in which both the institution and its employees function. The performance is then measured quarterly

to assess whether the employees are moving toward the correct direction.

4.6 Employee wellness programmes

The organisation values the wellness of its employees and during the year under review facilitated three Wellness Interventions to create

awareness in various areas of wellness amongst all employees.

4.7 Policy development

The following Human Resources Policies and Strategies were developed:

• The Human Resources Management Strategy

• The Health and Safety Policy inclusive of the Emergency Evacuation Plan

Challenges faced by the public entity:

• Insufficient budget to implement the Training and Development Plan of the Organisation

• Lack of office space to accommodate employees

• Lack of Human Resources Capacity to fulfil the mandate of the Organisation

Future HR plans /goals:

• Implementation of the Human Resources Management Strategy which will ensure that a number of programmes and policies are put

in place.

• To become an employer of choice where employee are engaged and positively contribute towards the Organisation‟s objectives.

• Maintain a minimal to 0% vacancy rate.

58

4.8 Oversight Statistics

Personnel Cost by Programme:

Programme Total Expenditure for the

entity (R‟000)

Personnel Expenditure

(R‟000)

Personnel exp. as a % of

total exp.

No. of employees Average personnel cost

per employee (R‟000)

Office of the CEO 45 449 556 1 961 212 4.31% 2 980 610

Compliance & Licensing 45 449 556 7 809 699 17.18% 19 411 036

Financial Management 45 449 556 2 883 732 6.34% 7 411 961

Human Resources 45 449 556 1 536 820 3.38% 10 153 682

Information Technology 45 449 556 910 901 2.00% 2 455 450

Legal Services & Board

Secretariat

45 449 556 1 203 288 2.64% 2 601 644

Strategic Management

Services

45 449 556 2 220 808 4.88% 3 740 269

Personnel Cost by Salary Band:

Level Personnel Expenditure (R‟000) % of personnel exp. to total

personnel cost (R‟000)

No. of employees Average personnel cost per

employee (R‟000)

Senior Management 4 306 800 19.4% 3 1 435 600

Professional Qualified 2 869 575 15.4% 4 717 39

Skilled 9 594 011 51.6% 10 959 401

Semi-Skilled 2 156 883 11.9% 12 184 740

Unskilled 306 477 1.7% 4 76 619

Total 19 233 746 100% 45 427 416

Performance Awards:

Programme Performance rewards Personnel Expenditure (R‟000) % of performance rewards to total

personnel cost (R‟000)

Senior Management 3 727 105 44.11%

Professional qualified 2 99 049 6.0%

Skilled 13 650 338 39.45%

Semi-skilled 8 145 753 8.84%

Unskilled 4 26 120 1.58%

Total 30 1 648 365 100%

59

Training Costs:

Directorate/ Business

Unit

Personnel Expenditure

(R‟000)

Training Expenditure

(R‟000)

Training Expenditure as

a % of Personnel Cost.

No. of employees trained Avg training cost per

employee

Office of the CEO 20 296 085 R9 200 0.04% 1 R9 200

Strategic management

services

20 296 085 R7 900 0.03% 2 R3 950

Legal services and

Board Secretariat

20 296 085 R9 200 0.04% 1 R9 200

Corporate Services 20 296 085 R24 840 0.12% 8 R3 105

Compliance and

Licensing

20 296 085 R48 852 0.24% 9 R5 428

Employment and vacancies:

Programme 2011/2012

No. of Employees

2012/2013 Approved

Posts

2012/2013

No. of Employees

2012/2013

Vacancies

% of vacancies

Compliance & Licensing 15 22 18 4 18.2%

Corporate Services 14 16 16 0 0

Legal Services 0 2 2 0 0

Office of the CEO 2 2 2 0 0

Strategic Services

Management 0 4 4 0 0

Senior Management 3 3 3 0 0

Professional qualified 3 4 4 0 0

Skilled 12 27 24 3 12.5%

Semi-skilled 8 8 7 1 14.2%

Unskilled 4 4 4 0 0

Total 30 46 42 4 0

There were no vacancies in senior management during the year. A number of positions were unlocked by the Board in October 2012 of which

four were vacant at year end.

Employment Changes:

Salary Band Employment at beginning of

period

Appointments Terminations Employment at end of the

period

Senior Management 3 0 0 3

Professional Qualified 3 2 2 3

Skilled 12 11 0 23

Semi-Skilled 8 3 2 9

Unskilled 4 0 0 4

Total 30 16 4 42

60

Reasons for staff leaving:

Reason Number % of total no. of staff leaving

Death 0 0%

Resignation 3 7.14%

Dismissal 1 2.38%

Retirement 0 0%

Ill health 0 0%

Expiry of contract 0 0%

Other 0 0%

Total 4 9.5%

One staff member was dismissed due to misconduct. Two employees resigned due to better growth prospects and career growth opportunities.

All four positions were replaced within the year.

Labour Relations: Misconduct and disciplinary action

Nature of disciplinary Action Number

Verbal Warning 1

Written Warning 2

Final Written warning 0

Dismissal 1

Equity Target and Employment Equity Status

Levels MALE

African Coloured Indian White

Current Target Current Target Current Target Current Target

Senior Management 2 1 1 1 0 1 0 0

Professional qualified 1 2 0 0 1 0 0 0

Skilled 6 3 0 0 0 0 4 3

Semi-Skilled 0 3 0 0 0 0 0 0

Unskilled 2 0 0 0 0 0 0 0

Total 11 10 1 1 1 1 4 3

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Equity Target and Employment Equity Status:

Levels FEMALE

AFRICAN COLOURED INDIAN WHITE

Current Target Current Target Current Target Current Target

Senior Management 0 2 0 1 0 0 0 0

Professional Qualified 2 0 0 3 0 0 0 1

Skilled 10 8 0 1 0 0 1 1

Semi-Skilled 8 5 1 1 0 1 0 0

Unskilled 2 0 0 0 0 0 0 0

Total 22 15 1 6 0 1 1 1

Levels Disabled Staff

Male Female

Current Target Current Target

Senior Management 0 0 0 0

Professional qualified 0 0 0 1

Skilled 0 0 0 0

Semi-Skilled 0 0 0 0

Unskilled 0 0 0 0

Total 0 0 0 1

62

5. Part E: Financial Information

5.1 Statement of Responsibility

Statement of responsibility for the financial statement for the year ended 31 March 2013

The Directors are responsible for the preparing financial statements that fairly present the financial position, performance and cash flows for the

period and for the related information contained in the annual report.

The Directors maintained adequate accounting records and an effective system of internal controls and risk management and comprised in all

material respects with applicable laws and regulations.

The Directors prepared the annual financial statements presented on pages 68 to93 using Standards of GRAP. Appropriate accounting policies

supported by reasonable and prudent judgements and estimates have been used consistently;

The external auditors are responsible for reporting on whether the financial statements are fairly presented. Their report is presented on page

65.

The Directors are financially dependent on a transfer payment from Provincial Treasury. On the basis that the transfer payment has been listed

on the Estimates of National Expenditure the Board believes that it will continue to be a going concern in the year ahead. Based on this reason,

the Board prepared the annual financial statements on a going concern basis.

The annual financial statements for the year ended 31 March 2013 were approved by the Board on 24 May 2013 and are signed on its behalf by

the undersigned.

-------------------------

Name: Adv N. Mayosi

Capacity: Chairperson

Date: 31 May 2013

------------------------

Name: R.M. Zwane

Capacity: Chief Executive Officer

Date: 31 May 2013

64

5.2 Report of the External Auditor

5.2.1 Introduction

I have audited the financial statements of the Eastern Cape Gambling and Betting Board set out on pages 68 to 93, which comprise

the statement of financial position as at 31 March 2013, the statement of financial performance, statement of changes in net assets

and the cash flow statement for the year then ended, and the notes, comprising a summary of significant accounting policies and

other explanatory information.

5.2.2 Accounting authority’s responsibility for the financial statements

The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with the

South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public

Management Finance Act of South Africa, 1999 (Act No.1 of 1999) (PFMA), and for such internal control as the accounting authority

determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to

fraud or error.

5.2.3 Auditor-General’s responsibility

My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with

the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), the General Notice issued in terms thereof and International

Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain

reasonable assurance about 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 judgement, including the assessment of the risks of material misstatement of the

financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant

to the entity‟s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in

the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity‟s internal control. 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.

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

5.2.4 Opinion

In my opinion, the financial statements present fairly, in all material respects, the financial position of the Eastern Cape Gambling and

Betting Board as at 31 March 2013, and its financial performance and cash flows for the year then ended in accordance with SA

Standards of GRAP and the requirements of the PFMA.

5.2.5 REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In accordance with the PAA and the General Notice issued in terms thereof, I report the following findings relevant to performance

against predetermined objectives, compliance with laws and regulations and internal control, but not for the purpose of expressing an

opinion.

5.2.6 Predetermined objectives

I performed procedures to obtain evidence about the usefulness and reliability of the information in the annual performance report as

set out on pages 28 to 42 of the annual report.

The reported performance against predetermined objectives was evaluated against the overall criteria of usefulness and reliability.

The usefulness of information in the annual performance report relates to whether it is presented in accordance with the National

Treasury‟s annual reporting principles and whether the reported performance is consistent with the planned objectives. The

usefulness of information further relates to whether indicators and targets are measurable and relevant as required by the National

Treasury Framework for managing programme performance information.

65

The reliability of the information in respect of the selected objectives is assessed to determine whether it adequately reflects the

facts.

There were no material findings on the annual performance report concerning the usefulness and reliability of the information.

5.2.7 Additional matter

I draw attention to the matter below.

5.2.7.1 Material adjustments to the annual performance report

Material audit adjustments in the annual performance report were identified during the audit, all of which were corrected by

management.

5.2.7.2 Compliance with laws and regulations

I performed procedures to obtain evidence that the entity has complied with applicable laws and regulations regarding financial

matters, financial management and other related matters. My finding on material non-compliance with specific matters in key

applicable laws and regulations as set out in the General Notice issued in terms of the PAA is as follows:

5.2.7.3 Strategic planning and performance management

The accounting authority did not ensure that the public entity had and maintained an effective, efficient and transparent system of

internal control regarding performance management, as required by section 51(1)(a)(i) of the PFMA. This relates to material

misstatements identified during the audit, which were subsequently corrected.

5.2.7.4 Internal control

I considered internal control relevant to my audit of the financial statements, the performance report and compliance with laws and

regulations. The matters reported below under the fundamentals of internal control are limited to the significant deficiencies that

resulted in the finding on compliance with laws and regulations included in this report.

5.2.7.5 Leadership

Monitoring of action plans for prior year findings on performance information was not properly implemented. The entity also did not

have sufficient monitoring controls in place to ensure proper implementation of the overall process of planning, budgeting,

implementation and reporting pertaining to the overall performance management systems and processes.

5.2.7.6 Financial and performance management

The entity did not have a proper filing system in place that provides for the maintenance of information that supports reported

performance contained in the annual performance report. The annual performance report contained numerous material

misstatements that were identified through the audit process, that were subsequently corrected by management. This was mainly

due to staff members not fully understanding the requirements of the National Treasury Framework for managing programme

performance information (FMPPI), as well as lack of review of the portfolio of evidence by management to support the reported

performance.

66

5.2.7.7 Governance

The internal audit unit identified certain significant internal control deficiencies in the year under review; however, deficiencies relating

to the validity, accuracy and completeness of reported performance information were not reported.

to the validity, accuracy and completeness of reported performance information were not reported.

East London

31 July 2013

67

STATEMENT OF FINANCIAL POSITION

As at 31 March 2013

NOTES 2013 2012

R R

ASSETS

Current assets

Cash and cash equivalents 2 8,941,794 8,724,755

Prepayments 3 191,154 177,239

Receivable on collection for distribution from non-exchange transactions 4 10,248,452 8,493,807

Trade and other receivables from exchange transactions 5 1,768,788 1,763,818

21,150,188 19,159,619

Non-current assets

Property, plant and equipment 6 7,127,202 6,836,365

Intangible assets 7 145,583 151,145

TOTAL ASSETS 28,422,973 26,147,129

LIABILITIES

Current liabilities

Collections for distributions from non-exchange transactions 8 (5,750,480) (8,741,716)

Trade and other payables from exchange transactions 9 (16,322,505) (13,143,039)

Provisions 10 (2,782,270) -

TOTAL LIABILITIES (24,855,255) (21,884,755)

NET ASSETS 3,567,718 4,262,374

Net assets

Accumulated surplus 3,567,718 4,262,374

TOTAL NET ASSETS 3,567,718 4,262,374

68

STATEMENT OF FINANCIAL PERFORMANCE

For the year ended 31 March 2013

NOTES 2013 2012

R R

REVENUE

Revenue from exchange transactions 11 8,633,205 6,105,287

Revenue from non-exchange transactions 11 35,687,000 31,187,000

44,320,205 37,292,287

EXPENDITURE

Administrative expenditure 12 11,331,506 9,950,531

Corporate social investment 13 883,316 1,003,980

Consumer protection and public education 14 5,461,934 -

Depreciation 6 476,075 658,837

Amortisation of intangible assets 7 56,464 3,849

Employee costs 15 20,232,326 14,713,370

Impairment loss - trade debtors 5 - 143,460

Impairment loss - other debtors 16 17,026 53,576

Legal costs 719,433 3,244,354

Marketing and research costs 17 1,418,371 3,133,237

Other operating expenses 18 3,212,175 2,540,313

Statutory audit fees 19 1,878,750 1,240,000

Zone 4 settlement 20 (297,579) 5,500,000

TOTAL EXPENDITURE 45,389,797 42,185,507

NET EXPENDITURE 1,069,592 4,893,220

Finance income 21 384,282 449,804

Loss on disposal of property, plant and equipment 9,346 122,097

NET OTHER INCOME 374,936 327,707

DEFICIT FOR THE YEAR 694,656 4,565,513

69

STATEMENT OF CHANGES IN NET ASSETS


Accumulated Total

Surplus

R R

Balance as at 01 April 2011 as restated 8,827,887 8,827,887

Deficit for the year 4,565,513 4,565,513

Balance as at 31 March 2012 4,262,374 4,262,374

Balance as at 01 April 2012 4,262,374 4,262,374

Deficit for the year 694,656 694,656

Balance as at 31 March 2013 3,567,718 3,567,718

70

CASH FLOW STATEMENT


Notes 2013 2012

R R

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts

Gambling fees and taxes 116,728,522 121,710,872

Grant 35,687,000 31,187,000

Receipts from customers 11,689,280 10,279,104

164,104,802 163,176,976

Payments

Gambling fees and taxes and exclusivity fee 117,891,502 164,619,352

Payment to suppliers and employees 45,553,382 42,169,144

163,444,884 206,788,496

Net cash flows from operating activities 22 659,918 (43,611,520)

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 384,282 449,804

Proceeds from sale of property, plant and equipment 6 2,718 149,000

Purchase of property, plant and equipment 6 (829,879) (809,806)

Net cash flows from investing activities (442,879) (211,002)

Net increase / (decrease) in cash and cash equivalents 217,039 (43,822,522)

Cash and cash equivalents at beginning of the year 8,724,755 52,547,277

Cash and cash equivalents at end of the year 2 8,941,794 8,724,755

71

STATEMENT OF COMPARISON OF ACTUAL AND BUDGET AMOUNTS


Note

Approved

Budget Final Budget

Actual

Amounts

Difference:

Final Budget

and Actual

R R R R

REVENUE

Revenue from exchange transactions 7,893,242 7,893,242 8,633,205 739,963

Revenue from non-exchange transactions 28,687,000 35,687,000 35,687,000 -

36,580,242 43,580,242 44,320,205 739,963

EXPENDITURE

Administrative expenditure 6,929,151 7,630,468 11,331,506 3,701,038

Corporate social responsibility 300,000 388,573 883,316 494,743

Consumer protection and public education - 7,000,000 5,461,934 (1,538,066)

Depreciation 827,127 666,654 476,075 (190,579)

Amortisation of intangible assets - - 56,464 56,464

Employee costs 22,711,111 22,709,033 20,232,326 (2,476,707)

Impairment loss - trade debtors - - - -

Impairment loss - other debtors - - 17,026 17,026

Legal costs 465,176 465,176 719,433 254,257

Marketing costs 1,559,097 1,163,018 1,418,371 255,353

Other operating expenses 2,650,656 2,419,396 3,212,175 792,779

Statutory audit fees 1,040,000 1,040,000 1,878,750 838,750

Zone 4 settlement - - (297,579) (297,579)

TOTAL EXPENDITURE 36,482,318 43,482,318 45,389,797 1,907,479

(97,924) (97,924) 1,069,592 1,167,516

Finance income 452,076 452,076 384,282 (67,794)

Loss on disposal of property, plant and equipment - - 9,346 9,346

452,076 452,076 374,936 (77,140)

(SURPLUS) / DEFICIT FOR THE YEAR 23 (550,000) (550,000) 694,656 1,244,656

CAPEX 550,000 550,000 840,412 290,412

(SURPLUS) / DEFICIT FOR THE YEAR INCLUDING CAPEX - - 1,535,068 1,535,068

72

ACCOUNTING POLICIES FOR THE YEAR ENDED 31 MARCH 2013

1.1 Reporting Entity

These annual financial statements are for the Eastern Cape Gambling and Betting Board. The financial statements encompass the reporting

entity as specified in the Public Finance Management Act, Act No. 1 of 1999, as amended. This comprises:

Province of the Eastern Cape Provincial Planning and Treasury

Province of the Eastern Cape Economic Development, Environmental Affairs and Tourism

1.2 Basis of Preparation

The annual financial statements have been prepared in accordance with the effective Standards of Generally Recognised Accounting Practice

(GRAP) for the Accrual Basis of Accounting including any interpretations, guidelines and directives issued by the Accounting Standards Board.

The Annual Financial Statements have been prepared on a going concern basis and the accounting policies have been applied consistently

throughout the period.

A summary of the significant accounting policies, which have been consistently applied, are disclosed below.

The following Standard of GRAP has been approved and an effective date has been determined by the Minister of Finance. The respective

effective dates of this Standard falls within reporting periods beginning after 1 April 2013 and have not been early adopted by the Board:

Reference Topic Impact on GRAP reporting framework

GRAP 25 Employee Benefits Full compliance with GRAP 25 not yet required. The

accounting policy of the board was followed. Effect on

future financial years to be assessed after the Minister

of Finance has determined an effective date.

The following Standards of GRAP have been approved, but the Minister of Finance has not determined an effective date yet.


GRAP 20 Related Party Disclosures Compliance with GRAP 20 not yet required. The

accounting policy of the board was followed. Effect on

future financial years to be assessed after Minister of

Finance has determined an effective date.

73


The following Standards of GRAP have been approved but are not required to be applied by the Board:


GRAP 18 Segment Reporting Impact to be assessed on future reporting periods when

application becomes compulsory (when effective date is

announced).

GRAP 105 Transfer of Functions Between Entities Under

Common Control

Impact to be assessed on future reporting periods

should the Board find itself in a position whereby

functions are transferred to entities under common

control.

GRAP 106 Transfer of Functions Between Entities Not Under

Common Control

Impact to be assessed on future reporting periods

should the Board find itself in a position whereby

functions are transferred to entities not under common

control.

GRAP 107 Mergers Impact to be assessed on future reporting periods

should the Board find itself in a position whereby it

mergers with another Entity.

1.2.1 Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation. Depreciation is calculated on the straight-line method

to write off the cost of assets to their residual values over their anticipated useful lives as follows:

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful life

Buildings 50 years

Fixtures and fittings 10 years

Motor vehicles 5 years

Office and operating equipment 4 years

Sundry assets 5 years

Office furniture 10 years

Computer equipment 3 years

Other

- Cell phone

- Library books

- 2 years

- 3 years

Land is not depreciated as it is deemed to have an indefinite life.

The useful lives as well as residual values are reviewed annually.

Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the sales proceeds and the

carrying amount of the assets and are recognised in the statement of financial performance as realised.

Property, plant and equipment are reviewed for impairment losses whenever events indicate that the carrying amount may not be recoverable.

An impairment loss is recognised in respect of the amount by which the carrying amount of the asset exceed its recoverable amount, which is

the higher of an asset's net selling price and value in use. An impairment loss or reversal of an impairment loss is recognised as an

expense/income in the statement of financial performance as incurred.

74


1.2.2 Intangible Assets

An intangible asset is recognised when:

• it is probable that the expected future economic benefit or service potential that is attributable to the asset will flow to the entity; and

• the cost or fair value of the asset can be measured reliably.

Intangible assets are carried at cost less accumulated amortisation and any impairment losses.

Software is amortised on a straight‐line basis over its anticipated useful life. Generally, costs associated with developing computer software

programmes are recognised as an expense as incurred. However, costs that are clearly associated with an identifiable and unique product,

which will be controlled by the entity and have a probable benefit exceeding the cost beyond one year, are recognised as intangible assets.

Expenditure which enhanced and extended the benefits of computer software programmes beyond the original life of the software is capitalised.

Computer software development costs recognised as assets are amortised using the straight‐line method over their useful lives. Costs

associated with the maintenance of existing computer software programs are expensed as incurred.

The useful life of the intangible assets has been assessed as follows:

Item Average useful life

Computer Software 3 years

Intangible assets are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected

from the use of the asset. The gain or loss arising on the disposal or retirement of an intangible asset is determined as the difference between

the sales proceeds and the carrying value and is recognised in the statement of financial performance.

1.2.3 Financial instruments

Financial assets and financial liabilities are recognised on the entity's Statement of Financial Position when the entity becomes party to the

contractual provisions of the instrument.

Impairment of financial assets

The Entity assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is

impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a

result of one or more events that has occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event has an

impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of

impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in

interest or principal payments, the probability that they will enter bankruptcy or other financial re-organisation and where observable data

indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that

correlate with defaults.

Trade and other receivables

Trade and other receivables are categorised as financial instruments at amortised cost and are initially recognised at fair value plus direct

transaction costs and subsequently carried at amortised cost using the effective interest rate method, less any impairment loss recognised to

reflect irrecoverable amounts. Amortised cost refers to the initial carrying amount, plus interest, less repayments and impairments.

Cash and cash equivalents

Cash includes cash on hand (including petty cash) and cash with banks (including call deposits). Cash equivalents are short-term highly liquid

investments, readily convertible into known amounts of cash that are held with registered banking institutions with maturities of three months or

less and are subject to an insignificant risk of change in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents

comprise cash on hand, deposits held on call with banks, net of bank overdrafts. The entity categorises cash and cash equivalents as at fair

value.

75


De-recognition of financial instruments

The Board derecognises a financial asset (or group of financial assets) when:

- The contractual rights to the cash flows arising from the financial asset have expired; or

- The entity transfers the financial asset, including substantially all the risks and rewards of ownership; or

- It transfers the contractual rights to receive the cash flows of the financial asset, but assumes a corresponding obligation to pay the

cash flows to one or more recipients, and consequently transfers substantially all the risks and benefits associated with the asset; or

- No future economic benefits are expected.

A financial liability (or group of financial liabilities) is derecognised when and only when the liability is extinguished, i.e. when the obligation

specified in the contract is discharged, cancelled or expires.

1.2.4 Retirement benefits

Retirement benefits

The policy of the Board is to provide retirement benefits through an established fund governed by the Pension Fund Act.

The provident fund is a defined contribution fund which does not require an actuarial valuation. Contributions to the provident fund are charged

to the Statement of Financial Performance in the year to which they relate. The Board has no obligation to fund post-retirement medical

benefits.

1.2.5 Provisions and contingencies

Provisions are recognised when:

- the Entity has a present obligation as a result of a past event;

- it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation;

and

- a reliable estimate can be made of the obligation.

The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at the reporting date.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it is no longer

probable that an outflow of resources embodying economic benefits or service potential will be required, to settle the obligation.

Contingent assets and contingent liabilities

Contingent assets and contingent liabilities are not recognised.

1.2.6 Revenue

Revenue comprises principally of:

Revenue from Exchange Transactions:

- Fees charged for services rendered (i.e. Annual admin fees);

- Recoveries of expenses incurred in the production of revenue;

- Sundry income

Revenue from Non-Exchange Transactions (Taxes and Transfers)

- Grant funding received from Provincial Government

Revenue from Exchange Transactions is recognised on accrual basis using the following methods to determine stage of completion:

- Fees charged for services rendered are recognised when they become due in terms of the Eastern Cape Gambling and Betting Act

No 5 of 1997. These fees are invoiced in advance in December each year for the financial year ending 31st March.

76


- Recoveries of expenses incurred in the production of revenue are accrued on completion of service rendered.

Revenue from Exchange Transactions is measured at amortised cost on the date it accrues.

Revenue from Non-Exchange Transactions:

Revenue relating to operational expenditure is recognised in the period in which the transfer agreement becomes binding and is measured at

fair value as at the date of recognition.

Gambling taxes and fees to the Provincial Treasury

The gambling taxes and part of the fees collected are paid over to the Provincial Revenue Fund at the end of each month as prescribed by the

Gambling and Betting Act. These gambling taxes and fees are not recognised as revenue as they are collected on behalf of the state However,

an asset and liability is recognised when taxes and fees become receivable from licensee and payable to the state. Receivable and payables for

collection and distribution to the state are initially measured at cost and carried at fair value.

1.2.7 Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts

payable are classified as current liabilities if payment is due within one year (or in the normal operating cycle of the business, if longer). If not,

they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.

Leave accrual

The employees of the Board are entitled to 22 working days per annum as leave gratuity. The policy adopted by the Board is that all its

employees should take leave during the year, failing which they will forfeit their leave days on the 30th of June each year. The leave days are

recognised as they accrue to employees. The liability is based on the total amount of leave days due to each employee at year end multiplied by

each employee's respective daily rate of remuneration which is calculated from the respective employee's gross annual remuneration package.

13th Cheque

The employees of the Board can structure their salary package to have a bonus portion (13th cheque) which is paid on the 15th of January each

year. The bonus is recognised as it accrues to employees who have elected to structure their salary packages to have a bonus portion.

1.2.8 Operating leases

Leases where the lessor retains the risk and reward of ownership of the underlying asset are classified as operating leases. Payments made

under operating leases are charged to the statement of financial performance on a straight line basis over the period of the lease.

1.2.9 Inventory

It is the policy of the Board to expense the cost of stationery items as and when they are purchased.

1.2.10 Fruitless and wasteful expenditure

Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised.

All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financial performance in the year

that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is

subsequently accounted for as revenue in the statement of financial performance.

1.2.11 Irregular expenditure

Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the

disclosure note to the Annual Financial Statements must be updated with the amount condoned.

77


Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by the National Treasury or

the relevant authority must be recorded appropriately in the irregular expenditure register. If liability for the irregular expenditure can be

attributed to a person, a debt account must be created if such a person is liable in law. Immediate steps must thereafter be taken to recover the

amount from the person concerned. If recovery is not possible, the accounting officer or accounting authority may write off the amount as debt

impairment and disclose such in the relevant note to the Annual Financial Statements. The irregular expenditure register must also be updated

accordingly. If the irregular expenditure has not been condoned and no person is liable in law, the expenditure related thereto must remain

against the relevant expenditure item, be disclosed as such in the note to the Annual Financial Statements and updated accordingly in the

irregular expenditure register.

1.2.12 Taxation

No provision for taxation has been made as the Eastern Cape Gambling and Betting Board is exempted in terms of Section 10 (1)(cA)(1) of the

Income Tax Act (Act No: 58 of 1962).

1.2.13 Related parties

The entity operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government. As a

consequence of the constitutional independence of the three spheres of government in South Africa, only entities within the

national/provincial/local sphere of government are considered to be related parties.

1.2.14 Budget information

Comparison of budget and actual amounts are presented in a separate additional financial statement: Statement of Comparison of Budget and

Actual Amounts. The entity presents both the approved and the final budget amounts. Differences (variances) between the actual amounts and

budget amounts are also presented. The financial statements and budget are both prepared on the accrual basis. The entity has elected to

prepare a separate financial statement to present the budget to actual comparison.

1.2.15 Accounting estimates and judgements

Management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related

disclosures. The determination of estimates requires the exercise of judgement based on various assumptions and other factors including

historical experience. Actual results in the future may vary from the estimates. Judgements and estimates are principally made in the following

areas:

The calculation of residual value per asset falling under property, plant and equipment

The estimation of the remaining useful lives of each item of property, plant and equipment.

78

NOTES TO THE ANNUAL FINANCIAL STATEMENT


2013 2012

R R

2. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of:

Bank balances 2,225,957 6,244,879

Cash on hand 5,000 5,000

2,230,957 6,249,879

Investigation deposits 6,710,837 2,474,876

8,941,794 8,724,755

Cash and Bank: Cash is invested with Standard Bank of Southern Africa Limited, which is a reputable bank in Southern Africa and earns

interest at 4.35% per annum. Included in bank balances is an amount of R6 710 837 which relates to funds held on deposit. These funds are

held in a separate 32 day deposit account with Standard Bank. These funds are refundable to the licensees upon completion of investigations

and therefore do not form part of the Board‟s operating cash. The Board has a credit card facility of R250 000.

Note: The Board paid salaries on behalf of staff employed by Mbizana Development Trust and bursaries for students who are from

disadvantaged families.

79



5. TRADE AND OTHER RECEIVABLES FROM EXCHANGE TRANSACTIONS (continued)

2013 2012

Trade and other receivables impaired R R

The amount of the impairment was R0 as of 31 March 2013 (2012: R143 460)

Opening balance 143,460 156,000

Reconciliation of provision for impairment of trade and other receivables - 143,460

Utilisation of impairment (143,460) (156,000)

- 143,460

Amounts past due, but not impaired 5,250 259,796

6. PROPERTY, PLANT AND EQUIPMENT

Cost/Valuation

(R)

Accumulated

depreciation and

Accumulated

impairment (R)

Carrying value

(R)

Cost/Valuation

(R)

Accumulated

depreciation and

Accumulated

impairment (R)

Carrying value

(R)

Buildings 5,232,974 987,718 4,245,256 5,232,973 880,963 4,352,010

Cell phones 147,262 49,646 97,616 97,026 72,844 24,182

Computer equipment 635,633 384,485 251,148 538,242 260,150 278,092

Fixtures and fittings 277,286 95,865 181,421 170,615 112,481 58,134

Furniture and equipment 855,480 552,846 302,634 799,106 510,419 288,687

Land 1,070,750 - 1,070,750 1,070,750 - 1,070,750

Library books 215,814 215,814 - 215,814 215,814 -

Motor vehicles 1,354,392 376,015 978,377 1,057,264 292,754 764,510

9,789,591 2,662,389 7,127,202 9,181,790 2,345,425 6,836,365

Reconciliation of property, plant and equipment -31 March 2013

Opening balance

(R) Additions (R) Disposals (R) Depreciation (R)

Depreciation

adjustment (R) Total (R)

Buildings 4,352,011 - - 106,755 - 4,245,256

Cell phones 24,182 123,754 - 52,671 (2,351) 97,616

Computer equipment 278,092 155,965 8,771 180,092 (5,954) 251,148

Fixtures and fittings 58,133 144,698 3,215 18,583 (388) 181,421

Furniture and equipment 288,687 57,433 80 96,423 (53,017) 302,634

Land 1,070,750 - - - - 1,070,750

Library books - - - - - -

Motor vehicles 764,510 297,128 - 222,835 (139,574) 978,377

6,836,365 778,978 12,066 677,359 (201,284) 7,127,202

2013 2012

80



6. PROPERTY, PLANT AND EQUIPMENT (continued)

Reconciliation of property, plant and equipment -31 March 2012

Opening balance

(R) Additions (R) Disposals (R) Depreciation (R)

Depreciation

adjustment (R) Total (R)

Buildings 4,459,184 - - 107,174 - 4,352,010

Cell phones 79,743 - - 55,561 - 24,182

Computer equipment 374,521 115,975 505 211,899 - 278,092

Fixtures and fittings 74,239 - - 16,105 - 58,134

Furniture and equipment 351,363 52,036 - 98,935 15,777 288,687

Land 1,070,750 - - - - 1,070,750

Library books 36,834 - - 36,834 - -

Motor vehicles 680,629 486,801 270,591 132,329 - 764,510

7,127,263 654,812 271,096 658,837 15,777 6,836,365

Land and buildings comprise a sub-division of Erf 2863, Beacon Bay, measuring 2371 m2, purchased in 2002 together with an office building.

During the year the Board reviewed the residual values and remaining useful lives of property, plant and equipment items. The effect of the

adjustment can be seen in the depreciation adjustment column in the above table and has been taken to surplus / (deficit) for the year. It was

deemed impractical to determine the effect on future reporting periods. It was not deemed practical to determine the residual values of the

library books and as such these items remain in use with a zero carrying value.

Summary

Cost/Valuation

(R)

Accumulated

Depreciation (R) Carrying Value (R)

Cost/Valuation

(R)

Accumulated

Depreciation (R) Carrying Value (R)

Computer software 205,897 60,314 145,583 154,994 3,849 151,145

205,897 60,314 145,583 154,994 3,849 151,145

Reconciliation of intangible assets - 2013

Opening Balance

(R) Additions (R) Disposals (R) Transfers (R) Depreciation (R) Total (R)

Computer software 151,145 50,902 - - 56,464 145,583

Total 151,145 50,902 - - 56,464 145,583

Reconciliation of intangible assets - 2012

Opening Balance

(R) Additions (R) Disposals (R) Transfers (R) Depreciation (R) Total (R)

Computer software - 154,994 - - 3,849 151,145

Total - 154,994 - - 3,849 151,145

2013 2012

8. COLLECTIONS FOR DISTRIBUTION FROM NON-EXCHANGE TRANSACTIONS R R

Taxes and levies 5,750,480 8,741,716

5,750,480 8,741,716

7. INTANGIBLE ASSETS

2013 2012

81



9. TRADE AND OTHER PAYABLES FROM EXCHANGE TRANSACTIONS

2013 2012

R R

Accruals 2,734,304 3,531,584

Elonwabeni (Pty) Ltd (Refer note 20) - 5,500,000

Investigation deposit accounts 6,710,837 1,091,265

Trade payables 6,877,364 3,020,190

16,322,505 13,143,039

Trade and other payables are recorded at amortised cost.

10. PROVISIONS

Performance bonus provision opening balance - -

Provision for the year 2,782,270 -

Performance bonus provision closing balance 2,782,270 -

The performance bonus was classified as an accrual in 2012 due to the fact that the individual performance assessments had been completed

by the date that the annual financial statements were signed completed and approved. Performance assessments have not been completed for

the 2013 year. The amount to be paid is therefore uncertain resulting in the classification as a provision.

11. REVENUE

Revenue from exchange transactions:

The amounts included in revenue arising from exchange of services are as follows:

Bad debts recovered 136,035 156,000

Over provision of debtors 7,425 -

Fees 3,323,114 3,396,459

Recoveries 4,873,708 2,507,196

Sundry income 292,923 45,632

8,633,205 6,105,287

Revenue from non-exchange transactions:

The amount included in revenue arising from non-exchange transactions is as follows:

35,687,000 31,187,000

Government Funding - Department of Economic Development,

Environmental Affairs and Tourism

82



2013 2012

R R

12. ADMINISTRATIVE EXPENSES

Bank charges 34,912 30,420

Board of Directors - fees 3,077,840 1,501,450

Board of Directors - travel and subsistence 930,023 693,945

Consultation fees 780,957 2,342,403

Evaluation and hearings 1,987,133 608,457

Inspection, investigation, compliance and audit costs 531,117 530,209

Stationery and printing 496,948 354,533

Training and staff development 1,956,998 2,307,228

Travelling and subsistence 1,386,356 1,581,886

Special events 149,222 -

11,331,506 9,950,531

During the year the Board underwent a process of investigating the issuance of Bingo licences. The process is heavily dependent on the Board

members for decision making purposes as well as appearing at public hearings. As a result the Board of Directors fees are substantially higher

than the prior year. Evaluation and hearing costs have also increased substantially in the current year as a result of the Bingo licensing process.

The costs involved in the licensing process are recoverable from deposits paid by licence applicants and are included in the “Recoveries” line in

note 11.

13. CORPORATE SOCIAL INVESTMENT

The Board has sponsored various schools and sporting codes as part of its Corporate Social Investment. The schools are a junior secondary

school and a crèche. The sporting codes include boxing, hockey and marathon running.

14. CONSUMER PROTECTION AND PUBLIC EDUCATION

The Board undertook various consumer protection and public education activities as part of the additional R7m grant received. Refer to note 23.

15. EMPLOYEE COSTS

2013 2012

R R

Basic salary 13,814,938 9,893,859

Casual labour 252,150 61,288

Funeral benefit 4,490 -

Insurance 111,938 65,867

Medical aid - company contributions 616,324 661,578

Pension 1,437,135 1,082,328

Performance awards 2,669,493 1,632,455

Recruitment costs 253,215 219,304

Other non pensionable allowances 1,013,934 1,052,196

Unemployment Insurance Fund 58,709 44,494

20,232,326 14,713,370

83



15. EMPLOYEE COSTS (CONTINUED)

2013 2012

Senior Management Remuneration: R R

Remuneration of the Chief Executive Officer

Allowances 120 000 120 000

Bonus 336 200 315 220

Fund contributions 210 125 194 580

Salary 1 328 297 1 066 938

1 994 622 1 696 738

Remuneration of the Chief Financial Officer

Allowances 120 000 108 000

Bonus 195 820 100 980


Salary 746 264 666 746

1 161 018 962 912

Remuneration of the Compliance & Licensing Manager

Allowances 110 400 108 000

Bonus 195 081 182 906


Salary 720 933 602 105

1 157 084 1 013 090

SENIOR MANAGEMENT REMUNERATION 4 312 724 3 672 740

The amount shown as bonuses above relates to the provision raised in terms of the Policy on Integrated

Performance Managment System.

16. IMPAIRMENT OF OTHER DEBTORS

Impairment of other debtors 17 026 53 576

17. MARKETING AND RESEARCH COSTS

The costs for marketing and research include the following:

Advertising, subscriptions and publications 434 774 793 817

Research and public education 983 597 2 339 420

1 418 371 3 133 237

84



2013 2012

R R

18. OTHER OPERATING EXPENSES

Bi lateral relations - 21,896

Canteen and catering 203,015 143,919

Communication costs 545,807 552,088

Computer consumables 5,844 22,925

Courier and delivery charges 102,478 65,090

Consumables 3,897 -

Fuel, oil and licenses 123,680 94,414

Fire fighting 3,881 -

Insurance premiums 166,084 150,457

License fees - software packages/purchases 27,326 44,565

Losses written off - 22,028

Maintenance and repairs: machinery, equipment and other 298,718 95,123

Maintenance and repairs: property and buildings 229,443 32,815

Municipal services 403,011 384,979

Rentals in respect of operating leases - plant, machinery and equipment 230,380 215,824

Security services 362,168 392,205

Software annual license fees 147,908 112,510

Staff wellness and team building 303,796 124,740

Uniforms and corporate clothing; crockery 121 2,809

Year end function 54,618 61,927

3,212,175 2,540,313

19. STATUTORY AUDIT FEES

Statutory Audit - Auditor-General 1,878,750 1,240,000

20. ZONE 4 SETTLEMENT

Elonwabeni Resorts (Pty) Ltd applied for a casino licence in zone 4 (Mthatha) in 2005. The Board lost its case against Elonwabeni Resorts (Pty)

Ltd on 31 October 2011 for the licence of zone 4 (Mthatha) and had to issue the licence to Elonwabeni Resorts (Pty) Ltd in terms of the court

order. The Board came to an agreement with Elonwabeni Resorts (Pty) Ltd on 23 May 2012 to cancel the licence and to reissue the request for

proposals. The Board agreed to provide for this liability to Elonwabeni Resorts (Pty) Ltd of R5 510 000 for the cancellation of licence in the

2011/12 financial year. During the current financial year the Board paid Elonwabeni Resorts (Pty) Ltd an amount of R5 212 421resulting in a

R297 579 over provision.

2013 2012

R R

21. FINANCE INCOME

Interest Revenue

Bank 397,884 413,060

Debtors (13,602) 36,744

384,282 449,804

The debit interest of R13 602 arises as a result of the unwinding of the amortised interest on the Mbizana Development Trust loan.

85



2013 2012

R R

22. CASH (USED IN) / GENERATED FROM OPERATIONS

Deficit (694,656) (4,565,513)

Adjustments for:

Allowances for losses 17,026 197,036

Amortisation of intangible assets 56,464 3,849

Depreciation 476,075 658,837

Interest income (384,282) (449,804)

Loss on disposal of assets 9,346 122,096

Changes in working capital:

Increase / (decrease) in trade and other payables 2,970,500 (37,556,333)

Increase in trade and other receivables (1,790,555) (2,021,688)

659,918 (43,611,520)

23. COMPARISON OF ACTUAL TO BUDGET AMOUNTS

The budget disclosed in the Comparison of Budget to Actual amounts covers the period 1 April 2012 to 31 March 2013 and is for the Eastern

Cape Gambling and Betting Board entity. The budget is prepared on the same basis as the annual financial statements, being the accrual basis

of accounting. Expenses in the budget are classified in the same manner as for the financial statements.

During the year the Board received an additional R7 million grant from the Department of Economic Development, Environmental Affairs and

Tourism, for consumer protection campaigns.

2013 2012

R R

24. OPERATING LEASE COMMITMENTS

Minimum lease payments due

- within one year 212,118 226,255

- in second year 20,485 250,127

Present value of minimum lease payments 232,603 476,382

The Eastern Cape Gambling and Betting Board entered into operational lease agreements with the following terms:

Six photocopy machines for a period of 36 months with a minimum monthly charge of R11 935 which remains constant. The

machines will be returned to the lessor at the end of the period. The lessor is required to provide maintenance for the equipment

during the period of the agreement.

PABX and conference phone systems are leased for a period of 36 months with a minimum monthly charge of R5 888 and R1 001

respectively. The equipment will be returned to the lessor at the end of the lease period.

86



2013 2012

25. TRAINING AND DEVELOPMENT COSTS R R

Overseas Travel

Car hire 1,873 1,600

Registration daily allowance 458,894 178,313

Training 41,553 75,318

Travel and accommodation 1,063,234 828,007

Local Travel

Car hire 15,967 45,936

Registration daily allowance 20,225 156,686

Training 99,992 484,869

Travel and accommodation 151,606 416,364

Bursary

Accommodation 4,713 41,107

Registration fees and books 84,522 44,426

Subsistence and travel 14,419 34,602

1,956,998 2,307,228

Included in the training costs is travel and accommodation that relates to overseas conferences attended by the Board members and Senior

Management during the year under review. The costs relating to this line item have always been budgeted for under training, as well as under

research and development and reported as such in the annual financial statements.

26. BOARD MEMBERS EMOLUMENTS

Board Fees

Expenses

Allowances

Sub

Committees Other Total

31 March 2013 R R R R R

For services as Directors 2,486,600 - 268,200 323,040 3,077,840

31 March 2012

For services as Directors 878,300 - 338,900 284,250 1,501,450

Detailed Board members emoluments:

Board Members Board Fees Retainer

Board

Committee

Fees

Training

Overseas &

Local Total

R R R R R

Adv N Mayosi 460,250 144,000 - 24,750 629,000

M Vena 318,750 - 34,200 25,500 378,450

O Mtati 519,850 - 49,400 46,750 616,000

P Voges 317,850 - 43,600 21,250 382,700

Y Makhasi 242,250 - 27,000 29,750 299,000

Z Nomafu 338,650 - 37,700 25,500 401,850

V Tshangana 144,500 - - - 144,500

P Nqakula 144,500 - - - 144,500

2,486,600 144,000 191,900 173,500 2,996,000

2013

2013

87



26. BOARD EMOLUMENTS (CONTINUED)

Board Fees Retainer

Board

Committee

Fees

Training

Overseas &

Local Total

Audit Committee Members R R R R R

H Marsberg - - 22,800 2,540 25,340

L Smith - - 34,500 3,000 37,500

P White - - 19,000 - 19,000

- - 76,300 5,540 81,840

TOTAL 2,486,600 144,000 268,200 179,040 3,077,840

Board Members Board Fees Retainer

Board

Committee

Fees

Training

Overseas &

Local Total

R R R R R

Adv N Mayosi 183,800 144,000 - 55,250 383,050

M Vena 119,000 - 59,500 25,500 204,000

O Mtati 159,000 - 50,300 34,000 243,300

P Voges 153,000 - 62,800 - 215,800

Y Makhasi 102,000 - 22,000 8,500 132,500

Z Nomafu 161,500 - 37,700 17,000 216,200

V Tshangana - - - - -

P Nqakula - - - - -

878,300 144,000 232,300 140,250 1,394,850

Audit Committee Members

H Marsberg - - 30,400 - 30,400

L Smith - - 42,000 - 42,000

P White - - 22,800 - 22,800

R J Hill (Prior Member) - - 7,600 - 7,600

S Whitfield (Prior Member) - - 3,800 - 3,800

- - 106,600 - 106,600

TOTAL 878,300 144,000 338,900 140,250 1,501,450

2012

2013

27. RELATED PARTIES

Relationships

a) Administrator of Mbizana Development Trust: R M Zwane - Chief Executive Officer

The Chief Executive Officer was appointed by the High Court as the Administrator of the Mbizana Development Trust on 19th

of August 2009. This resulted in the Trust being a related party to the Eastern Cape Gambling Board due to significant roles

the Chief Executive Officer assumed in the administration of the trusts. There were no transactions between the Eastern Cape

Gambling and Betting Board and those members of the key management personnel and companies in which key management

personnel have an interest in, during the year under review. The new trustees were appointed on 11 January 2013 and the

Chief Executive Officer‟s term of office as an Administrator came to an end.

88



27. RELATED PARTIES (CONTINUED)

b) RB and Associates

During April 2012, Mr O Mtati, a Board Director, was appointed as a director and became a shareholder in RB and Associates.

d) Related party transactions included in exchange transactions:

Amount spent with RB & Associates 136 736 -

28. RISK MANAGEMENT

Liquidity risk – The Board manages liquidity risk through an on-going review of the future commitments. Cash flow forecasts are prepared and

monitored.

Maturity analysis of non-derivative financial liabilities 2013 2012

Contractual maturities due R R

- within one year 24,855,255 21,884,755

- in second year - -

24,855,255 21,884,755

2013 2012

R R

Amounts relating to Trusts:

Opening balance:

Amatola Trust - 18,977

Mbizana Development Trust 1,235,531 932,542

Reimbursement amounts paid by:

Amatola Trust - 18,977

Mbizana Development Trust - 932,542

Additional amounts paid on behalf of:

Amatola Trust - -

Mbizana Development Trust 319,484 1,235,531

Outstanding amounts at year end

Amatola Trust - -

Mbizana Development Trust 1,524,387 1,235,531

89



28. RISK MANAGEMENT (CONTINUED)

Credit risk – Credit risk consists mainly of cash deposits and cash equivalents. The Board only deposits cash with major banks with high credit

standards. The Board has therefore no concentration of credit risks.

The board‟s maximum exposure to credit risk is equal to the cost amount of the financial assets at balance sheet date and is summarised as

below:

2013 2012

R R

Cash and cash equivalents 8,941,794 8,724,755

Receivables on collection for distribution 10,248,452 8,493,807

Trade and other receivables from exchange 1,768,788 1,763,818

As of 31 March 2013, trade and other receivables were not impaired. The age analysis of financial assets is indicated in note 5.

29. FINANCIAL INSTRUMENTS

The table below indicates the different classes of financial instruments.

Amortised

Cost Fair Value

31 March 2013 R R

Financial Assets 12,208,394 8,941,794

Cash and cash equivalents - 8,941,794

Prepayments 191,154 -

Receivable on collection for distribution from non-exchange transactions 10,248,452 -

Trade and other receivables from exchange transactions 1,768,788 -

Financial Liabilities (24,855,255)

Payable on collection for distributions (5,750,480) -

Trade and other payables from exchange (16,322,505) -

Provisions (2,782,270) -

31 March 2012

Financial Assets 10,434,864 8,724,755

Cash and cash equivalents - 8,724,755

Prepayments 177,239 -

Receivable on collection for distribution from non-exchange transactions 8,493,807 -

Trade and other receivables from exchange transactions 1,763,818 -

Financial Liabilities (21,884,755) -

Payable on collection for distributions (8,741,716) -

Trade and other payables from exchange (13,143,039) -

Reclassification of 2012 balances between classes:

Available for

Sale Fair Value

Receivables /

Loans

Amortised

Cost

R R R R

Cash and cash equivalents (8,724,755) 8,724,755 - -

Prepayments - - (177,239) 177,239

Receivable on collection for distribution - - (8,493,807) 8,493,807

Trade and other receivables from exchange - - (1,763,818) 1,763,818

Financial Liabilities

Payable on collection for distributions - - 8,741,716 (8,741,716)

Trade and other payables from exchange - - 13,143,039 (13,143,039)

90



29. FINANCIAL INSTRUMENTS (CONTINUED)

Financial instruments at amortised cost are non-derivative financial assets and financial liabilities with fixed or determinable payments excluding

those that have been designated as fair value at initial recognition or those that are held for trading.

Financial instruments at fair value comprise financial assets or financial liabilities that are:

a) Derivatives

b) Combined instruments that are designated at fair value

c) Instruments held for trading. A financial instrument is held for trading if:

I. It is acquired or incurred principally for the purpose of selling or repurchasing it in the near-term; or

II. On initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is

evidence of a recent actual pattern of short term profit-taking

d) Non-derivative financial assets or financial liabilities with fixed or determinable payments that are designated at fair value at initial

recognition

e) Financial instruments that do not meet the definition of financial instruments at amortised cost of financial instruments at cost.

30. GOING CONCERN

The Entity receives an annual government grant and prepares its budget on the basis of such grant. The entity is not able to generate sufficient

cash flows from its core business to cover its operations. As such the entity is dependant for its continued operation in the foreseeable future on

continued Government financial support. Management has determined that such support is reasonably expected to continue and therefore has

prepared these Annual Financial Statements on the going concern basis.

31. EVENTS AFTER THE REPORTING DATE

Management has reviewed the events between 31 March 2013 and the date of issue by the accounting authority to the executive authority. No

events occurred during this time frame which provides further information on the amounts disclosed at 31 March 2013.

32. TAXATION

The income of the Board is exempt from taxation in terms of section 10(1) (cA) of the Income Tax Act no 58 of 1962.

33. COMMITMENTS

1. The Board has engaged with a company specialising in document management to assist with evaluating the document management

needs of the Board as well as setting up of related policies.

2. As part of the consumer protection and responsible gambling campaigns, the Board has entered into a contract with the Premier

Boxing League for an amount of R4 560 000. R2 560 000 of the full amount will fall into the 2013/14 financial year.

2013 2012

R R

Approved and committed

Document management system 178,296 -

Premier Boxing League 2,560,000 -

2,738,296 -

91



34. CONTINGENT LIABILITIES

During the year the Board advertised a position for Human Resources Administrator. The unsuccessful applicant challenged the case with the

CCMA. The CCMA ruled in favour of the applicant and ordered the Board to pay an amount of R80 000. Estimated legal costs to resolve the

case amount to R60 000. The Board applied for a review of the decision.

35. IRREGULAR EXPENDITURE

2013 2012

Details of irregular expenditure R R

Irregular expenditure brought forward 449,504 -

Irregular expenditure condoned during the year (449,504)

Non adherence to SCM policies and procedures - 449,504

Total - 449,504

No disciplinary action was taken as a result of the irregular expenditure.

36. BUDGET VS ACTUAL

2013 2012

Reconciliation - Budget surplus with deficit per statement R R

of financial performance:

Net deficit per the statement of financial performance (694,656) (4,565,513)

Zone 4 Settlement not budgeted for (Refer to Note 20) (297,579) 5,500,000

Over / (under) budget: Revenue from exchange transactions (739,963) 263,691

Over budget: Revenue from finance income 67,794 -

Debt impairment not budgeted for - 197,036

Loss on sale of property, plant and equipment 9,346 122,097

Over / (under) budget: Expenditure 2,205,058 (1,082,311)

Net surplus per approved budget 550,000 435,000

Material variances

Actual to

Budget

Variance

R

Revenue from exchange transactions 739,963

Administrative expenditure 3,701,038

Corporate social responsibility 494,743

Consumer protection and public education (1,538,066)

Employee costs (2,476,707)

Other operating expenses 792,779

Statutory audit fees 838,750

Zone 4 settlement (297,579)

Revenue from exchange transactions – Related recovery of the over-expenditure of Evaluation and Hearing Costs expenses. Refer note 12.

Administrative expenditure – The over-expenditure is primarily attributable to the increased costs of Board fees and Evaluation and Hearing

Costs related to the Bingo Licensing process. Refer note 12.

Corporate social responsibility – The over expenditure is mainly due to sponsorship of a gym for the Boxing Academy, a campaign against

sexual abuse and a campaign against drug abuse.

92



36. BUDGET VS ACTUAL CONTINUED

Consumer protection and public education - The additional funds received for this programme were received in December, leaving

insufficient time to implement programme effectively.

Employee costs – A number of positions were filled only in the second half of the year.

Other operating costs – During the year the ECGBB was faced with high costs of repairs and maintenance relating to the building, fixtures and

fittings as well as higher than anticipated municipal related costs. Two teambuilding sessions at higher than budgeted for costs also resulted in

over expenditure.

Statutory audit fee – Audit fee provided for based on amounts supplied by Auditor-General.

Zone 4 Settlement – refer note 20.

37. CRIMINAL OR DISCIPLINARY STEPS TAKEN AS A CONSEQUENCE OF MATERIAL LOSSES

None

38. FRUITLESS AND WASTEFUL EXPENDITURE

Fruitless and wasteful expenditure is defined as expenditure which is made in vain and would have been avoided had reasonable care been

exercised. The Board did not incur any fruitless or wasteful expenditure during the current financial year.

39. SURRENDERING OF UNSPENT FUNDS

The Board has no unspent funds at 31 March 2013 and has therefore not accounted for unspent funds as per Treasury Instruction 3 of 2013/14.

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