ANNUAL 2018/2019 REPORT - provincialgovernment.co.za · The KwaZulu-Natal Gaming and Betting Board...

REPORT ANNUAL 2018/2019

Department:

edteaEconomic Development,Tourism andEnvironmental Affairs

CONTENTS Part A:GENERAL INFORMATION 2

1. Public Entity’s General Information 3

2. List of Abbreviations/Acronyms 3

3. Foreword by the Executive Authority 4

4. Foreword by the Chairperson 8

5. Overview from the CEO 10

6. Statement of Responsibility and Confirmation of

Accuracy for the Annual Report 13

7. Strategic Overview 14

8. Legislative and Other Mandates 15

9. KZNGBB Organisational Structure 15

10. Members of the Board 18

11. Value created by the KZNGBB 20

Part B:Performance Information 22

1. Auditor’s Report: Predetermined Objectives 23

2. Situational Analysis 23

3. Strategic Outcome Oriented Goals 31

4. Introduction 35

5. Programme 1: Administration 35

6. Programme 2: Finance 45

7. Programme 3: Information And Communication

8. Technology 47 8. Programme 4: Licensing and Registration 48

9. Programme 5: Gaming Monitoring and Compliances 52

10. Programme 6: Betting Monitoring and Control 58

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Part C:GOVERNANCE REPORT 60

1. Introduction 61

2. Portfolio Committees 61

3. Executive Authority 61

4. The Board Governance Structures 64

5. Risk Management 65

6. The Audit Committee 66

7. Accountability and Compliance 66

8. Legislative and Regulatory Compliance 66

9. Ethics and Values 66

10. Whistleblowers Line 67

11. Social Responsibility 67

12. Socio-Economic Development 67

13. Gallery Of Activities And Programmes Undertaken in

the Year Under Review 73

14. Audit Committee Report 79

Part D:HUMAN RESOURCE MANAGEMENT 80

1. Introduction 81

2. Human Resources Oversight Statistics 81

Part E:FINANCIAL STATEMENTS 86

1. Report of the Auditor -General 88

2. Annual Financial Statements 94

KwaZulu-Natal Gaming and Betting BoardAnnual Report 2018/2019

2Department:


PART A

G E N E R A LI N F O R M AT I O N


PART A: GENERAL INFORMATION

3

REGISTERED NAME KwaZulu-Natal Gaming and Betting Board

PHYSICAL ADDRESS (PIETERMARITZBURG) KZNGBB House Redlands Estate 1 George Macfarlane Lane Pietermaritzburg 3201

PHYSICAL ADDRESS (DURBAN) 18th Floor, The Marine22 Dorothy Nyembe Street Durban 4001

POSTAL ADDRESS Private Bag X9102Pietermaritzburg3200

TELEPHONE NUMBER (PIETERMARITZBURG) +27 33 345 2714

TELEPHONE NUMBER (DURBAN) +27 31 583 1800

EMAIL ADDRESS [email protected]

WEBSITE ADDRESS www.kzngbb.org.za

EXTERNAL AUDITORS Auditor-General: South Africa: KZN

BANKERS ABSA Bank

BOARD SECRETARY Mrs S. Meyiwa

1. PUBLIC ENTITY’S GENERAL INFORMATION

2. LIST OF ABBREVIATIONS / ACRONYMSAGSA Auditor General of South Africa

ACT KZN Gaming and Betting Act (No. 08 of 2010)

AMENDMENT ACT KZN Gaming and Betting Amendment Act (No. 04 of 2017)

BOARD KwaZulu-Natal Gaming and Betting Board

EDTEA KwaZulu-Natal Department of Economic Development, Tourism and Environmental Affairs

B-BBEE Broad-Based Black Economic Empowerment

CEO Chief Executive Officer

CFO Chief Financial Officer

CSI Corporate Social Investment

FICA Financial Intelligence Centre Act (No. 38 of 2001)

GROP Gambling Regulatory Online Portal

GRAP Generally Recognised Accounting Practice

KZNGBB/ ENTITY KwaZulu-Natal Gaming and Betting Board

MEC Member of Executive Council

PFMA Public Finance Management Act (No 1 of 1999)

PPPFA Preferential Procurement Policy Framework Act

SARGF South African Responsible Gambling Foundation

SCM Supply Chain Management

SMME Small Medium and Micro Enterprises

TR Treasury Regulations

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3. MEC FOREWORDKWAZULU-NATAL GAMING AND BETTING BOARD

The KZN Gaming and Betting Board is a Schedule 3C Public Entity which forms a part of the Department of Economic Development, Tourism and Environmental Affairs,

I am pleased to present the entity’s Annual Report for the 2018/2019 Financial Year. The regulatory role of the Board is prescribed and defined by provisions of sections 146 of the South African Constitution, National Gambling Act,2004 |(Act No.7 of 2004), including the National regulations, the KZN Gaming and Betting Act, the Public Finance Management Act 1999 (Act No. 1 of 1999) as well as Treasury regulations. In the, 2019 State of the Nation Address, President Cyril Ramaphosa highlighted the following key objectives which are relevant to this report:· Economic Transformation and job creation;· Education and Skills Development;· Building a Capable, Ethical and Developmental State; and· A better Africa and a better world.

In his inaugural speech, the KwaZulu-Natal Premier, the Honourable S. Zikalala highlighted the following key result areas that all government departments and entities must align to:· Job creation;

· Growing the economy;

· SMME’s Development; and

· Building an incorruptible Government.

REVENUE COLLECTION

Albeit, the country is in the grip of harsh economic conditions the gaming and betting industry has managed to achieve

sustainability and growth. The industry directly creates jobs and generates revenue, meaning that the industry remains both

a direct and indirect catalyst for economic growth, since taxes that are collected form a part of the provincial fiscus, which itself

catalyses growth. During the 2018/2019 financial year, despite the challenging economic climate, the KwaZulu-Natal Gaming

and Betting Board managed to grow tax revenue which is a major contributor to the Provincial Governments “own” revenue

collection as follows:-

· Casinos R 430 760 440 (3.37% increase)

· Route Operators R 107 550 420 (12.05% increase)

· Bingo R 1 712 946 (1526% increase)

· Bingo with LPM R 16 992 685 (13.26% increase)

· Betting Industry R 127 661 337 (1.39% increase)

MS.NOMUSA DUBE-NCUBE, MPLMEC DEPARTMENT OF ECONOMIC DEVELOPMENT, TOURISM AND ENVIRONMENTAL AFFAIRS.

Department:




5

JOB CREATION

The KZN Gaming and Betting industry has achieved the following in respect of job creation and access to employment

opportunities within communities wherein gambling licensees operates:

REGISTERED EMPLOYEES - EMPLOYMENT/JOB CREATION WITHIN THE GAMBLING INDUSTRY IN KZN

Sector 2018/19 2017/18

Casino 2481 2497

LPMs (Route Operators) 97 98

Bingo 438 294

Bookmakers & Totalisators 3483 3032

TOTAL 6499 5921

SMME CONTRIBUTIONS BY THE GAMBLING INDUSTRY

The Board monitors, through compliance contributions made by licensees within the gambling industry which has contributed

to the following spend on the Provincial economy.

SMME CONTRIBUTIONS BY GAMBLIING INDUSTRY

Description 2018/19 2017/18

Spend on Local Economy – Gaming* R 44 036 173 R 338 510 728

Spend on Local Economy – Betting** R 509 200 348 R 297 746 502

Spend on SMMEs – Gaming* R 24 451 369 R 185 649 549

Spend on SMMEs – Betting** R 233 774 525 R 281 732 347

Spend on PDI Business – Gaming* R 61 780 804 R 648 319 777

Spend on PDI Business – Betting** R 150 389 164 R 131 535 222

TOTAL R 1 023 632 383 R 1 883 494 127

RADICAL ECONOMIC TRANSFORMATION

The transformation of the gaming and betting industry remains a priority in the strategic outcomes of the entity. In addition,

we need to ensure the involvement of more communities in the industry and increase employment and look at ways of

protecting the interests of the public. There needs to be a balance between job creation, socio-economic development and

revenue collection contributions by this sector. One of EDTEA’s key mandates involves the attainment of developmental targets

in respect of the reduction of poverty, inequality and unemployment levels. A key driver in the fight against the eradication

of the aforementioned challenges is the full implementation of the radical economic transformation directive. The Board has

a transformation strategy and implementation plan to support the radical socio-economic transformation of the gambling

industry which aims to create opportunities for previously disadvantaged individuals to gain access to the gambling industry

and to ensure that licensees comply with National and Provincial B-BBEE strategies.

The current context on which the economy operates is not in favour of the previously disadvantaged sectors of the communities,

including women and youth, to that end it is imperative that there are mechanisms in place to ensure the economic growth

and development in these sectors. The KZN Gaming and Betting Board have commenced processes for the implementation

of programmes which are underpinned by the principles of radical economic transformation. In that, the entity will create a

platform for opportunities to enable new black entrants into the industry with a view to create jobs and improve the lives of

the citizens of KwaZulu-Natal. We keenly await the roll-out of these programmes within the upcoming Financial Year

PUBLIC PRIVATE PARTNERSHIPS

In order to sustain the economic development and viability of this province it is key that strategic partnerships are developed

between the government and the private sector. The constant engagement and collaboration with the relevant role players

will create fertile ground in respect of increasing the growth potential of this province. It is in this vein I am looking to engage



6Department:


and develop fruitful public private partnerships with the captains of the gaming and betting industry to improve the lives of

communities in KwaZulu-Natal.

FINANCE AND GOVERNANCE

In line with the Provincial Government’s efforts to ensure budget discipline, prudent financial management and integrity. The

KZN Gaming and Betting Board, as a reporting entity within my portfolio, will also focus on austerity measures in its planning

and execution of strategic and operational objectives. Good governance is essential for the long term success of the entity

and I am pleased to present our governance report on pages 62-79 which sets out how the KZN Gaming and Betting Board

conducts its operations in accordance with internationally accepted principles of good corporate governance.

PROTECTION OF THE PUBLIC INTEREST

This Province is seeing a sharp deterioration in the economic environment over the past two fiscal periods, as a result the

entity’s focus needs to set its strategic outcome oriented goals, taking into account the knock-on effects on government

revenues and available resources. The entity, under my leadership, will commit itself to ensuring the best possible return

on its resources, taking into account the societal negative impacts of gambling. The KZN Gaming and Betting Board has

a cooperation agreement with the South African Responsible Gambling Foundation. The foundation offers free treatment

and counselling programmes to the problem gamblers and their families. One of the key areas of cooperation involves the

undertaking of community awareness programmes within the vulnerable communities that are harshly affected by addictive

gambling in the province. The Board will endeavour to raise awareness relating to the services offered by the body as well as

provide support in an effort to bolster the province-specific initiatives that are undertaken by the South African Responsible

Gambling Foundation.

CONCLUSION

The 2018/2019 financial year saw the new Chairperson and Board members commence their three year term at the gaming

regulator. Our Board members bring critical balance and a wealth of skills and experience to the entity and these elements

would complement the skills of the executive team. I would like to take this opportunity to officially welcome Dr S.G. Ngcobo

and his team as well as the Chief Executive Officer, Ms P. Baloyi and her team and I look forward to a fruitful relationship with

them.

As we plan for the year ahead, we expect and are preparing for another challenging period. However our key economic driver,

the Board and skilled people mean that we are well positioned to grow the industry and deliver the results and service we

were appointed for.

MS.NOMUSA DUBE-NCUBE, MPL

MEC DEPARTMENT OF ECONOMIC DEVELOPMENT, TOURISM AND ENVIRONMENTAL AFFAIRS.

31 July 2019



7

8Department:


I present the KwaZulu-Natal

Gaming and Betting Board’s

Annual Report for the

financial year ended

31 March 2019.

4. FOREWORD BY THE

CHAIRPERSONDr S G Ngcobo Chairperson

KwaZulu-Natal Gaming and Betting Board

During the year the Board’s reporting lines were reviewed and

KZNGB Board is now required to report to the Department of

Economic Development, Tourism and Environmental Affairs

and the Member of the Executive Council responsible for

the Department, the Honourable Ms Nomusa Ncube-Dube

has become the designated MEC responsible in terms of the

KZN Gaming and Betting Act, no 8 of 2010 as amended. This

adjustment has been ably managed by the support staff of

the Department and the Section 8 Representative on the

Board, Mrs Navlene Thavar who adds significant value to

the deliberations of the Board. As the Boards’ governance

structures have continued to produce sound results in

performance and revenue generation it was not deemed

necessary to make any changes to the governance structures

within the Board. Its functions have been ably carried out by

the five (5) established Committees during the year.

Despite ongoing challenges in the South African economic

climate the Board has recorded annual growth in revenue

collection for the Provincial fiscus and the gambling industry

has contributed R684,7 million in gaming and betting taxes.

The underlying reason for the growth in revenues can be

attributed to:

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• An increase in the number of gambling operations and

sites being licensed becoming operational.

• The continued roll out of Bingo, Type A and Type B sites

• New Game types, EBT’s and game changes in the industry

• an increase in Internet cafes and online illegal gambling

activities

• Increased monitoring responsibilities in respect of

licensees compliance with bid/license commitments,

license conditions and B-BBEE legislation

• Increased responsibilities in respect of the verification

and collection of gambling taxes payable to the Provincial

Government in terms of the Act.

The Boards primary strategic objective is to ensure that it

executes its mandate through implementation of gambling

policy, legislation and directives issued by the Provincial

Government. This mandate is to regulate the gambling

industry in KwaZulu-Natal, to place restrictions on gambling

where appropriate, to licence persons, machines and

operators, impose fees, taxes, levies and penalties on certain

gambling activities, to appoint and authorise inspectors and

to implement the terms of reference for the Transformation

Fund once approved. These activities have been attended

to again this year by the Board with dedication and energy

and despite challenges arising from delays in the ability to

recruit staff the entity has continued to perform in terms of

achieving operational strategic objectives.

Transformation: The Board continues to ensure that the

transformation strategy is implemented and great effort to

ensure that National Governments policy and applicable

legislation in this respect are being adhered to is being

exerted in the consideration of applications for licences

from the Board as well as in new measures to monitor the

adherence to applicable legislation and licence conditions

by licensees. The Board will continue to drive job creation

and has commenced with a Black Industrialist Programme

which will bear fruit for the Province for many years to come.

Legislative Amendments: There remains some uncertainty

about the gambling law legislative amendments at both a

National and Provincial level which continues to impact the

revenue generation from certain licences in the Province and

may also still impact the business operations of the Board in

due course once the legislation is passed. The Board receives

regular reports and eagerly anticipates the conclusion of

the local process to amend the Provincial legislation which

will lend clarity to a number of participants in the gambling

sector.

BPR: The second phase of the Business Process Re-

engineering Project is nearing completion and the benefits

of the Gambling Regulation Operations Portal which went

live on 15 May 2017 are being identified by the Board as

regulator as well as by the licensees it regulates.

I express my gratitude and deep appreciation to the Board

Members, CEO and Staff who have shown dedication and

diligence in executing their functions and duties, and in

achieving their targets to deliver on the mandate that brings

us all together.

I acknowledge the oversight and support role that the former

MEC Responsible, the new Premier for the Province, Mr Sihle

Zikalala, whom we congratulate on his appointment and

wish well in his new role. We look forward to working closely

with the new MEC Responsible, Ms Nomusa Ncube-Dube, in

our efforts to bring prosperity and growth to the people of

our Province as we usher in the 4th Industrial Revolution.

Dr S G Ngcobo

Chairperson


31 July 2019

10Department:


As the Gaming and Betting industry generates revenue

through the collection of taxes from licensees which

forms part of the Provincial Fiscus and contributes to job creation, tourism, economic and social development and

supplier development, it remains both a direct and

indirect catalyst for inclusive economic growth.

5. OVERVIEW

CHIEF EXECUTIVE OFFICER Ms N P Baloyi Chief Executive Officer


The year ended 31 March 2019 has delivered successes and

challenges with an overall growth of 4.7 percent in revenue

collection, The revenue collected increased from R653,730

million in 2017/18 to R684,697 million in 2018/19, the Board

continues to collect levies and taxes from the industry for

Provincial Government. The tax collection from the industry

were as follows:

IndustryR ‘million

2018/19 2017/18 % growth

Casinos R 430,760 R 416,705 3.37%

Route Operators R 107,550 R 95,999 12.03%

Bingo R 1,713 R 0,112 1 526.51%

Bingo with LPM R 16,993 R 15,003 13.26%

Bookmakers R 110,007 R 106,205 3.60%

Totalisator R 17,654 R 19,713 -10.44%

Total R 684,617 R 653,730 4.74%



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KEY HIGHLIGHTS OF THE ACHIEVEMENTS FOR THE YEAR UNDER REVIEW

Transformation of the industry continues to be a key

priority for economic development. Inroads have been

made in growing ownership participation especially in

the Bookmaking sector, where the number of Bookmaker

licenses owned by African owners increased from 1% in

2012 to 24% in the period under review. The revision of

the KZN Gaming and Betting Act focused on the Board’s

Transformation of the entire gambling industry, creation of a

new category of horse racing which will allow for rural horse

racing to be brought into the fold thereby creating economic

opportunities for the rural and previously disadvantaged

individuals. As a result of the amendments to the KZN

Gaming and Betting Act, a category of Standardbred and

Harness racing must be incorporated into the regularization

of the industry. The amendments also provided clarity in

respect of the Electronic Bingo Terminals which the Board

has now rolled out, this accounted for the significant growth

in tax revenue from Bingo

The KZNGBB regulates an expanding industry. In 2018/2019

Financial Year, all categories of licensees saw some growth

in revenues due to expansions in the sector despite a slow

growing economy. Suncoast and Sibaya Casinos have added

new gaming positions, Bingo Operators installing Electronic

Bingo Terminals at their respective sites and Route operators

plan on rolling out Type B Limited Payout Machines. There

has, however, been a year on year decline in the revenues for

the horseracing sector. The new determined bookmaking

rights that were issued in 2014 are starting to show some

growth and contributed positively to the growth in the

sector.

The Board social impact study which was commissioned

in the previous year was finalized after the year end and it

revealed amongst other factors gambling prevalence in the

province.

The benefits from Phase 1 of the Gambling Online Regulatory

Portal were realised during the year, efficiencies in processing

of applications and faster turnaround times were some of

the benefits of the system. The entity continued with the

development of Phase 2 which will be rolled out in the

following year.

AUDIT REPORT MATTERS IN THE PREVIOUS YEAR AND HOW

THEY WOULD BE ADDRESSED

The Auditor General has conducted the Year-End Audit. The

Audit opinion received from the Auditor-General in the period

under review was an Unqualified Audit. The matters raised

and reported in the previous financial year were addressed

adequately according to management’s assessment, new

action plans will be implemented to address the current

year findings. Management will continue to strive towards

achieving a Clean Audit in the Year ahead.



12Department:


MINIMIZING THE A NEGATIVE SOCIAL IMPACTS OF GAMBLING

Illegal Gambling continues to be a threat to licensed

gambling operations and poses the highest risk to creating

problem gamblers. The Board has devised a strategy that

includes proactive initiatives to combat illegal gambling and

to ensure that capabilities are strengthened to combat the

scourge of illegal gambling, thereby protecting the interests

of the public. Communication related activities have evolved

from internal and external communications to incorporate

initiatives that protect the interests of the public as well as

stakeholder engagements. Activations include Responsible

gambling and illegal gambling awareness campaigns in

communities.

CONTRIBUTION TOWARDS GOVERNMENT PRIORITIES

The Board’s performance, operations and interventions

continue to contribute, if not directly, then indirectly to the

PGDP strategic goals. Key focus areas remain as follows:

• Ensure accurate revenue collection for the Provincial

Government by the application of the KZN Gaming and

Betting Act through the collection and verification of fees

and taxes payable under the KZN Gaming and Betting

Tax Act by licensees, thereby contributing to growth of

the Provincial Economy.

• Updated KZNGBB’s Transformation Strategy

Implementation plan provides for an increase in the

number of Black persons participating and gaining

access into this industry to encourage growth in SMMEs

to support the smaller players within the gambling

industry, to enhance existing license conditions and will

focus on ownership.

• Targets for job creation within the gambling industry are

set by the Board in license conditions and employment

related commitments made by licenses are closely

monitored.

• The Boards transformation agenda includes training

and development opportunities for Black youth, Black

Women and designated groups to equip them with skills

which will enhance opportunities for future employment

in the gaming and betting industry.

The Board continues to place emphasis on the alignment of

Socio Economic development initiatives by the gambling

industry with the PGDP and the Poverty Alleviation

Master Plan, the SED initiatives are ongoing. Each licensee

continues to contribute to the community that falls within

its jurisdiction of operation, spend on CSI is included in

licensee conditions. Programmes are primary focused on

Health, Welfare, Education, Community Upliftment, Sports

and recreation and Arts and Culture. The gaming and betting

industry expended an amount of over R12.5 million in the

period under review on CSI programmes.

ACKNOWLEDGEMENTS/APPRECIATION

I like to express my appreciation to the previous MEC

responsible for the Gaming and Betting Portfolio, the

Honourable Premier, Mr W. C. Mchunu and the Section 8

Representative for their support. I would like to welcome

the new MEC who is now accountable for the Gaming and

Betting Portfolio, the Honourable Ms. N. Dube-Ncube. We

look forward to a fruitful relationship with the MEC and her

team. I would also like to express my appreciation to the

Chairperson Dr S.G. Ngcobo and Board members for their

leadership. Finally, I would like to appreciate the support

that I have enjoyed from our dedicated Management team

and the KZNGBB staff.

Ms N P Baloyi

Chief Executive Officer


Casino 2481

LPM (Route Operators) 97

Bingo 438

Bookmakers & Totalisators 3483



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5. STATEMENT OF RESPONSIBILITY AND CONFIRMATION OF ACCURACY FOR THE

ANNUAL REPORTTo the best of my knowledge and belief, I confirm the

following:

• All information and amounts disclosed in the annual

report is consistent with the annual financial statements

audited by the Auditor General.

• The Annual Report is complete, accurate and is free from

any omissions.

• The Annual Report has been prepared in accordance with

the guidelines on the annual report as issued by National

Treasury.

• The Annual Financial Statements (Part E) have been

prepared in accordance with the Generally Recognised

Accounting Principles (GRAP) standards applicable to the

public entity.

• The Accounting Authority is responsible for the preparation

of the annual financial statements and for the judgements

made in this information.

• The Accounting Authority is responsible for establishing,

and implementing a system of internal control has been

designed to provide reasonable assurance as to the

integrity and reliability of the performance information,

the human resources information and the Annual Financial

Statements.

• The external auditors are engaged to express an

independent opinion on the Annual Financial Statements.

In our opinion, the Annual Report fairly reflects the

operations, the performance information, the human

resources information and the financial affairs of the public

entity for the Financial Year ended 31 March 2019.

Yours faithfully

Chief Executive Officer Chairperson of the Board

Ms N P Baloyi Dr S G Ngcobo

31 July 2019 31 July 2019



14Department:


VISIONWe strive to be the centre of excellence in gaming and betting

regulation and transformation of the industry

MISSION

To protect the interest of the public by ensuring the integrity

of legalised gambling through:

• Strict enforcement of applicable legislation;

• Licencing of qualified entities and individuals; and

• Fulfilling the objectives of the Provincial Government to

deliver a significant sources of revenue, enhance tourism,

develop and transform the gaming and horseracing

industry, whilst promoting broad socio-economic and

employment opportunities.

VALUESINTEGRITY

To practice the highest ethical standards within the entity

SERVICE EXCELLENCE

To provide consistent, premium service to our stakeholders

FAIRNESS AND IMPARTIALITY

To make decisions in a fair and appropriate manner based on

relevant criteria and reliable information

PROFESSIONALISM

To demonstrate appropriate skills, good judgment, and polite

behaviour when dealing with all stakeholders

TRANSPARENCY

To embody honesty and open communication with all

stakeholders

INNOVATION

To create new ideas, processes or systems which, when

implemented, lead to positive effective change

6. STRATEGIC

OVERVIEW



15

7. LEGISLATIVE AND OTHER

MANDATESThe KwaZulu-Natal Gaming and Betting Board is a Provincial

Schedule 3C Public Entity subject to the provisions of the

PFMA. The establishment of the Board, its objects, powers

and functions are set out in Sections 5, 6 and 7 of the Kwa-

Zulu-Natal Gaming and Betting Act, 08 of 2010 and the KZN

Gaming and Betting Amendment Act, No. 04 of 2017, where

applicable. The objects of the Board are to:

ENSURE that all gambling authorised under the Act is

conducted in a manner which promotes the integrity of the

gambling industry and does not cause harm to the public

interest

ENSURE that all gaming authorised under the Act

promotes the province’s objectives for developing a gaming

industry, the priorities of which are the promotion of tourism,

employment and economic and social development in the

province

PROMOTE opportunities for persons contemplated in the

definition of “broad-based black economic empowerment”, as

contained in the Broad-Based Black Economic Empowerment

Act, 2003, to participate in the gambling industry of the

Province in the capacity of licensees or registrants under the

Act

INCREASE the ownership stakes of persons contemplated

in the definition of “broad-based black economic

empowerment”, as contained in the Broad-Based Black

Economic Empowerment Act, 2003 in the gambling industry

of the Province

DEVELOP appreciation for and knowledge of horse racing

amongst all communities, particularly those comprised of

historically disadvantaged persons

LIMIT restrictive practices, the abuse of dominant

market position and mergers in the betting industry, as

contemplated in the Competition Act, 1998 (Act No. 89 of

1998), and the Board is, for the purposes of the said Act, a

regulatory authority as defined in section 1 of that Act.



16Department:


The KZNGBB’s operations are governed by various constitutional, legislative, functional and policy mandates, some of which

include the following (excluding generic legislation such as Basic Conditions of Employment Act, etc):

LEGISLATIVE AND OTHER MANDATES EXPLANATIONKwaZulu-Natal Gaming and Betting Act (Act No. 8 of

2010)

Governs the regulation of the gambling industry and the

Board’s operations.KZN Gaming and Betting Amendment Act (Act No. 4 of

2017)KZN Gaming and Betting Regulations

KZN Gaming and Betting Rules

KwaZulu-Natal Gaming and Betting Tax Act (Act No. 9 of

2010)

Provides for the payment of taxes by persons licenced in

terms of the Act and matters connected therewith.Public Finance Management Act (Act No. 1 of 1999, as

amended)

Ensures a system of financial management is in place, ensures

transparency, accountability and sound management of

the revenue, expenditure, assets and liabilities, as well as

eliminating waste and corruption in the use of public assets.National Treasury Regulations

National Gambling Act (Act No. 7 of 2004, as amended) Provides for the co-ordination of concurrent national and

provincial legislative competence over matters relating

to casinos, racing, gambling and wagering, and provides

for the continued regulation of those matters; establishes

certain uniform norms and standards applicable to national

and provincial regulation and licensing of certain gambling

activities; and provides for the creation of additional norms

and standards applicable throughout the Republic.

National Gambling Regulations

Promotion of Access to Information Act (Act No. 2 of

2000)

Gives effect to the constitutional right of access to any

information held by the State that is required for the

exercise or protection of any rights, thereby promoting

transparency, accountability and effective governance of all

public bodies.Financial Intelligence Centre Act (Act No. 38 of 2001) Reveals the movement of monies derived from unlawful

activities, thereby curbing money laundering and other

criminal activities.Promotion of Administrative Justice Act (Act No. 3 of

2000)

Any act or decision of the Board that contravenes the

principles of procedurally fair administrative actions are

subject to judicial review.Schedule 4 of the Constitution of the Republic of South

Africa (No. 108 of 1996)

Sets out the areas of concurrent national and provincial

legislative competencies, which include racing, gambling

and wagering, excluding lotteries and sports pools.Section 195 of the Constitution of the Republic of South

Africa (No. 108 of 1996)

Public administration must be governed by the democratic

values and principles enshrined in the Constitution.Preferential Procurement Policy Framework Act (Act No.

5 of 2000)

Enhances the participation of previously disadvantaged

individuals and the small, medium and macro enterprises,

SMMEs in the public sector procurement system.Broad-Based Black Economic Empowerment Act (No 53

of 2003), as amended

Provides the framework for the promotion of black economic

empowerment and matters connected therewith.South African National Standards for Gaming Equipment

(1718)

All gambling machines and devices must comply with these

standards to protect the public.



17

GOVERNMENT POLICY FRAMEWORKS RELEVANCE TO KZNGBBNational Development Plan Transversal

Medium Term Strategic Framework Transversal, but key are: Outcome 12 – An efficient, effective

and development orientated public service; Outcome 14 –

Transforming society and unity the country.

Provincial Growth and Development Strategic

Framework

Sets a long term vision and direction for development in the

Province; serves as the overarching strategic framework for

development in the Province and is utilised in strategic and

annual planning.

Provincial Growth and Development Plan Translates the strategy into a detailed implementation plan

with goals and objectives. The KZNGBB aligns with the plan

to ensure contribution to the Province’s vision.

Medium Term Expenditure Framework The MTEF is annual, rolling three year-expenditure planning.

It sets out the medium-term expenditure priorities and hard

budget constraints against which plans can be developed

and refined.

National Treasury’s Framework for Managing

Programme Performance Information

Clarifies definitions and standards for performance

information; improves integrated structures, systems and

processes required to manage performance information;

defines roles and responsibilities; and promotes accountability

and transparency by providing Parliament, provincial

legislatures, and public with timely, accessible and accurate

performance information.

National Treasury’s Framework for Strategic Plans

and Annual Performance Plans

Sets out a framework to align strategic and annual

performance planning with emphasis on the outcomes

oriented monitoring and evaluation approach led by the

Presidency. Institutions must focus on the achievement of

outcomes oriented planning and report the results in a simple

and clear manner

SCM and PPPFA policy Provides guidelines on Supply Chain Management

KZNGBB Budget Policy and Provincial Guidelines Governs budget processes in line with National and Provincial

requirements.

National Gambling Policy, 2017 Outlines the policy position that intends to review the

gambling landscape in South Africa



18Department:


8. KZNGBB

ORGANISATIONAL STRUCTUREMEC RESPONSIBLE:

Department of Economic Development, Tourism and

Environmental Affairs. Ms N. Dube-Ncube

ACCOUNTING AUTHORITYKZNGBB BOARD

OFFICE OF THE CEOChief Executive Officer - Ms N P Baloyi

Communications Manager - Mrs C Naidoo

LICENSING AND REGISTRATION

Senior Manager: Mr B Radebe

INFORMATION AND COMMUNICATION

TECHNOLOGYIT Manager:Mr S Charles

HUMAN RESOURCESHR Manager:Mr S Gushu

LEGAL SERVICESChief Legal Advisor

Mr M Ngwenya

GOVERNANCE, RISK AND COMPLIANCE

Head: GRCMrs J Stretch

GAMING MONITORING AND CONTROL

Senior Manager: Mr R Goodayle

BETTING MONITORING AND CONTROL

Senior Manager:Mr R Bestel

FINANCEChief Financial Officer

Mr V Ramdas



19

9. MEMBERS OF THE

BOARD 2018/2019

DR S.G. NGCOBOChairperson of the Board

MS M.P. MYENIDeputy Chairperson

MR S.S ZONDI Board Member

MR S.N. CHETTY Board Member

MS Z. TENZA Board Member

MS N. THAVARMEC EDTEA - Section 8

Representative

MR S. MKHIZEMEC EDTEA - Section 8

Representative

ADV K.P. THANGO Board Member

PROF B.S. STOBIE Board Member

MR L. GABELABoard Member

DR T.I. NZIMAKWEBoard Member



20Department:


KZNGBB VALUE ADDED STATEMENT R’000Value Added 2017/18 2018/19

Income Generated R90 626 R73 473

Revenue(Taxes) R653 730 R684 696

Total R744 356 R758 169

Value Allocated

To employees R44 951 R48 865

Other expenses R22 655 R31 899

Total R67 606 R80 764

Total Value Created R676 750 R677 405

TOTAL VALUE CREATED BY KZNGBB

FINANCIAL CAPITAL

We receive a grant fund of R42, 310 mill (2018/2019 MTEF) from Provincial Government to Fund Operations.

ECONOMIC CAPITAL

We collect Revenue (taxes) for the Province (contributes about 20% of the total “own revenue” for Government)

SOCIAL AND RELATIONSHIP CAPITAL

We depend on licensees to create jobs, Corporate Social Investment, SMME and Enterprise Development, contribute to

tourism spatial and infrastructural development and to develop the rural economy.

INTELLECTUAL CAPITAL

We are 1 of 9 Provincial Gambling Regulators and carry the Province’s constitutional mandate in respect of regulating the

industry.

11. VALUE CREATED BY THE KZNGBB



21


PART B: PERFORMANCE INFORMATION

22Department:


PART B

P E R F O R M A N C EI N F O R M AT I O N



23

1. AUDITOR’S REPORT: PREDETERMINED OBJECTIVESThe Auditor-General South Africa (AGSA) currently performs the necessary audit procedures on the performance information

to provide reasonable assurance in the form of an audit conclusion. The audit conclusion on the performance against

predetermined objectives is included in the report to management, with material findings being reported under the

Predetermined Objectives heading in the Report on other legal and regulatory requirements section of the Auditor’s Report.

Refer page 88 of the Auditors Report, published as Part E: Financial Information.

2. SITUATIONAL ANALYSISKZNGBB Transfer from Office of the Premier to Department of Economic Development, Tourism and Environmental Affairs

Effective 1 April 2019, the KZNGBB, through a proclamation by the Honourable Premier, was transferred from the Office of

the Premier to the Department of Economic Development, Tourism and Environmental Affairs (EDTEA). Section 137 of the

Constitution authorizes the Premier to transfer, by proclamation, the administration of any function to a member of the

Executive Council.

As EDTEA is mandated to oversee the socio-economic transformation in the province it leads policy and strategic initiatives

directed at promoting development and growth in various sectors of the economy. In order to achieve its objectives, EDTEA

co-operates with various stakeholders and social partners that include the private sector and civil society. Like EDTEA, the

KZNGBB’s operations are guided by National and Provincial legislative, policy and strategic frameworks.

Gambling Market Share Statistics by Province

Predominantly, the same corporate players are operating across the nine Provinces. Below is the national gambling industry

by market share as at 2018

Gauteng R173 193 384 061 44%

Western Cape R61 315 640 408 16%

KwaZulu-Natal R70 291 705 629 18%

Mpumalanga R16 726 305 590 4%

Limpopo R12 057 973 119 3%

North West R10 707 300 591 3%

Northern Cape R4 263 821 301 1%

Eastern Cape R31 310 865 382 8%

Free State R9 932 132 028 3%

Source: NGB Financial Year Ending 31 March 2018

GAMBLING MARKET SHARE STATISTICS BY PROVINCE



24Department:


In 2018, KZN positioned itself as the second largest

contributor to the South African Gambling market against

eight other provinces at 18.0% (R70 291 705 629). There has

been an increase in the complexity of gaming systems and

technological advancements within the gaming industry.

General legislative challenges exist in an environment

of technology, innovation and development and with

the recent introduction of legislation regarding remote

gambling, the Board will engage and input to the proposed

gambling policy and monitor any impact on operation.

In South Africa, Internet gaming has not yet been regulated

and is illegal. There have been challenges that relate to online

gaming (Internet, social media) with no formal integrated

response. The draft National Norms and Standards dated

23rd May 2014, outlined norms and standards in respect of

online gaming which set out that online gaming requires

a co-ordinated policy approach. The National Policy

Framework has recommended that online gambling remain

illegal at this point and that measures be introduced to close

down existing operations and prosecute perpetrators. The

intention is for all enforcement agencies to jointly ensure the

eradication of illegal online gambling. Illegal gambling is

growing (increase in online gambling, unlicensed gambling

machines and gambling computer terminals and internet

cafes) and its impact on society.

National Industry Developments (excluding legislative

amendments)

Other industry developments and matters for consideration

in the strategic plan include the following:

· Upcoming National General Elections in 2019;

· The growing monopolisation (dominance of a very few

“big players”) in the betting industry.

· Technical Standards used to test gaming equipment

require review as they are outdated.

· Continued decline in viability of the horseracing industry.

· The challenge of minors gambling which is exacerbated by

online and social media opportunities.

· Crypto currency and Bitcoin and impact on the gambling

industry;

· Rollout of change of CEMS from Zonke to Route

Monitoring;

· EBT Roll out on a National scale;

· The reality of money laundering and the growing

challenge of cyber-crime within the sector (involvement

of SAPS required).

· Role of regulators in respect of competitive issues.

· Self-regulation model for horseracing.

· Change of Central Electronic Monitoring System for

Limited Payout Machines sector.

· Fourth Industrial Revolution

2.1 SERVICE DELIVERY ENVIRONMENT During the period under review, the KZNGBB fulfilled

its mandate through its predetermined objectives and

performance achievements in respect of its planned targets

as contained in the 2018/19 Annual Performance Plan ,

KZNGBB PERFORMANCE ACHIEVEMENT AGAINST 2018/19 APP TARGETS

Target not Achieved 10%Target Achieved 90%

The partial attainment of targets were in the main, as a result

of targets being met outside of the prescribed timeframes.

The entity has processes to ensure ongoing monitoring and

evaluation of performance of programmes/sub-programmes,

as well as performance against budget throughout the financial

year, and reported quarterly on financial and non-financial

performance and Regulation 3 of the KwaZulu-Natal Gaming

and Betting Regulations to its oversight bodies as required.

Performance information, enhancements to planning,

setting of performance targets, and development of

technical indicators and approvals of any amendment

were undertaken to address audit findings and to improve

performance reporting and compliance with performance

management frameworks going forward.

The entity has ensured that its budgets and resourcing

supported its service delivery targets and implementation of

its strategic objectives. The KZNGBB’s budget planning was in

accordance with the Medium Term Expenditure Framework

(MTEF). Spending pressures were experienced as efforts to avoid

wasteful and inefficient spending, in adherence to Provincial

Treasury Circular No PT10 of 2016-17, were maintained. The

current economic environment and Cabinet’s decision to

implement austerity measures were observed, and fiscal

discipline and sound financial management received increased

focus. The entity operated within these parameters, however

limited funds negatively impacts on the extent to which the

industry is regulated i.e. the number of planned site inspections

and audits were reduced from previous year.



25

The successful achievement of strategic objectives ensured contributions to Government priorities (in terms of the Provincial Growth

and Development Plan and the Medium Term Strategic Framework) and the ongoing development of a gambling industry which

promotes tourism, employment and economic transformation and social development in the Province. Attention remained on

ensuring accurate revenue collection for the Province, effective industry regulation and enforcement of compliance, promotion of

radical economic transformation and socio-economic development, protection of the public, elimination of fraud and corruption; and

enhanced service delivery. In line with the PGDP, this was achieved through delivery of the following:

• Capacitated entity enabled regulatory and compliance activities, licensing and registration of suitable new entrants and existing

licensees/registrants, and regulatory activities in line with gambling legislation thereby limiting potential negative impact on

society and promoting the integrity of the gambling industry.

• Verification of taxes payable by licensees ensured accuracy tax collection for Province.

• Stipulation of employment related licence conditions within communities promoted job creation / employment opportunities

within the gambling industry.

• Approved transformation strategy to promote access and ownership participation by previously marginalised persons within the

gambling industry.

• Licence conditions revised to incorporate Black ownership, management control, job creation/employment opportunities; skills

development, enterprise and supplier development (SMME development), and socio-economic development in compliance with

B-BBEE Codes of Good Practice.

• Monitoring of licensees’ progress against compliance targets in respect of employment equity, skills development and broad-based

black economic empowerment (B-BBEE) through regular audits and inspections.

• Facilitation of public participation and consultation through conducting public hearings and disputes resolution.

• Enforcement of compliance within the industry through disciplinary hearings and issuance of warning letters.

• Activities undertaken to eradicate illegal gambling and to create awareness of illegal gambling.

• Reports through the Whistleblower hotline are investigated.

• Awareness campaigns and initiatives in respect of responsible gambling.

The tables below reflect the industry statistics as at 31 March 2019 which directly impact on the service delivery functions

carried out by the operational units of the entity.

Table 1: Industry Statistics: Licensees – as at 31st March 2019

Sector Sector

Casinos 5 Totalisators 2

Bingo Operators 22 Racecourse Operators 2

Independent Site Operator 0 Totalisator Outlets 109

Route Operators 4 National Manufacturer Licence 1

Site Operators 563 Provincial Certificate of Registration as a Manufacturer 1

Bookmakers Rights (holding 109) 50

Table 2: Gaming Machines and Table Statistics – as at 31st March 2019

Casino Name No. of Licensed Gaming

Machines

No. of Operational

Machines

No. of Licensed Gaming Tables

No. of Operational

Tables

No. of Table Games

Sibaya 1400 1200 61 49 49

Suncoast 2350 1622 80 57 57

Umfolozi 300 288 14 14 14

Blackrock 300 300 10 10 10

Golden Horse 450 450 23 22 22

TOTAL 4800 3860 188 152 152



26Department:


The entity has continued to support a growing gambling

industry and has for the most part met the demands of

increased service delivery and regulatory requirements. This

industry growth is attributable to:

• An increase in the number of gambling operations and

sites being licensed and becoming operational.

• The continued roll out of Bingo, Type A and Type B sites.

• New game types, EBT’s and game changes in the industry.

• An increase in internet cafes and online illegal gambling

activities.

• Increased monitoring responsibilities in respect of

licensees’ compliance with bid/licence commitments,

licence conditions and B-BBEE legislation.

• Increased responsibilities in respect of the verification

and collection of gambling taxes payable to Provincial

Government in terms of the Act.

In ensuring regulatory compliance and enforcement, such

growth in the gambling industry has resulted in significant

growth in Board operational activities in respect of licensing,

registration monitoring and control activities. Such growth

in operations was evidenced by the following:

• An increase in the number of licensing and registration

applications received in the gaming sector.

• An increase in the number of applications processed and

investigated by the Licensing and Registration units.

• An increase in the number of corporate licences and

certificates; and employee registration certificates issued

within the Betting sector.

• An increase in the number of operational changes

request applications and gaming hardware and software

applications processed for the Gaming sector.

• An increase in the number of FICA inspections conducted

on gaming sites

• An increase in the number of monitoring audits/

inspections conducted

• An increase in the number of illegal gambling inspections/

investigations and awareness/training interventions

conducted to combat illegal gambling

Notwithstanding the growth in operations and regulatory

related activities, the resources within the units have

remained the same. Where there are vacancies resulting

from resignation or promotion, the lengthy delays in the

filling of vacant funded positions (due to the requirement

to obtain approval from the responsible MEC and Treasury),

negatively impact on service delivery, and the achievement

of performance targets, specifically within the operational

units.

Challenges were experienced in meeting planned targets

in respect of the processing of manual licensing and

registration applications within targeted timeframes. The

implementation of the automated application system

(Gambling Regulatory Online Portal “GROP”, also known

as Project Jika) during 2017/18 has enhanced operational

efficiencies and service delivery turn-around times within

certain units, and it is anticipated that a further improvement

in turnaround times will continue into the next financial year.

The continued implementation of the Board’s authorised

delegations to the Office of the CEO, including procurement

and financial delegations have resulted in improved service

delivery to stakeholders through reduced turnaround times

for various applications and operational approvals.

Significant focus has been given to the transformation of the

horseracing and betting sector during the period to increase

the number of Black persons accessing and participating

in the industry. Positive strides have been made which is

evidenced by an increase in “ownership participation” by

Black persons in this sector. Of the 26 new bookmaking

rights approved in 2016 (compulsory 60% ownership to be

held by Black People), 17 of such rights are operational. White

ownership has reduced from 73% to 32% since 2011/12

while Black African ownership has grown from 1% to 24%;

and Black persons ownership in businesses with a minimum

of 26% shareholding is a new category (28%). The graphs

below depict the progress made specifically in respect of

ownership since 2012, to April 2019.

TRANSFORMATION STATISTICS OF BOOKMAKING BUSINESSES AS AT 2011

Whites 73%

Indian 20%

Black 5%

Coloured 2%



27

TRANSFORMATION OF BOOKMAKING BUSINESSES - 31 MARCH 2019

Indian Sole Props 14%

Black Owned Corporates 24%

Coloured Sole Props 2%

Non -Black Empowered Corporates 14%

Black Empowered Corporates 28%

White Females Sole Props 10%

White Males Sole Props 8%

Consultation with the industry in terms of Section 30A of the

Act and a review of licence conditions took place to ensure

that the Boards mandate to transform the industry and

increase participation by Black people were incorporated.

Existing conditions were enhanced where necessary with

the Board requiring a B-BBEE Compliant licensee for all new

applications and relevant Financial Acquisitions. Monitoring

of compliance by licensees with their B-BBEE commitments

were enhanced to ensure the Board meets its transformation

and to ensure a compliant industry.

The Board introduced the Black Industrialist program during

the year. This was in support of the objective to increase

participation by those previously excluded in the industry.

The implementation of a Black Gambling Industrialist

Programme during this planning cycle was a catalyst in the

realisation of the following:

• Advancing Black ownership and participation at executive

management levels.

• Securing financial sources to allow Black persons to access

or buy into the gambling industry.

• Tourism infrastructure development.

• Promotion of small business within local communities and

creating an enabling environment.

• Economic development of local communities.

• Educational assistance from existing licensees.

• Employment creation.

The Board remains committed to expedite economic

empowerment within the industry, and as such monitoring

compliance and implementation of licensees’ transformation

related commitments will receive additional focus in the

forthcoming year. This includes the transfer of technical

know-how and skills to run a gambling operation and

services that support the gambling industry, (including

supplier, manufacturers and maintenance providers that are

registered with the Board in accordance with the Act). Non-

compliant licensees are summoned to hearings held by the

Board’s Disciplinary processes. The Licensing Committee

held stakeholder engagements with larger licensees that

were not meeting the compliance targets and objectives of

the Board. The Board met with all stakeholders to gain an

understanding of the industries and their needs as well as

outlined its key priorities which included transformation of

the industry.

2.2 ORGANISATIONAL ENVIRONMENT The entity’s operations remain very labour intensive and

from an operational point of view, the increase in number

of operational licensees required additional licensing,

registration, compliance and monitoring responsibilities,

which results in increased operational costs. The number of

staff within the respect operational units have not increased,

despite the growth in licensing, monitoring and compliance

related activities.

The current organisational structure has 3 vacant funded

posts, however in keeping in line with the austerity measures

implemented by Provincial Treasury, these positions may only

be filled once the necessary approvals have been obtained.

The lengthy approval process for the filling of critical vacant

posts impacts negatively on the entity as it places strain on

existing resources as a result of additional workloads, and

where units are under resourced, it impacts negatively on the

achievement of quarterly and annual performance targets.

The implementation of GROP has been a key and critical

project which has brought about operational efficiencies in

respect of the processing of various types of applications.

The implementation of Phase 2 commenced during the

year, including the automation of processes such as taxes,

compliance processes among others. Delegations approved

and implemented in terms of Section 22 of the KZN Gaming

and Betting Act continued to show improvements in turn

around and service delivery in the processing of applications,

particularly operational change requests. Other planned

GROP system developments will be undertaken during 2019

which will further automate processes, thereby improving

service delivery to our stakeholders.



28Department:


The Board has maintained National Government’s focus

in respect of austerity measures and in accordance with

Treasury Circular No PT (10) of 2016/17, has continued to

implement the following measures in its planning and daily

operations:

• Vacant posts remained frozen and critical posts that

became vacant through natural attrition were motivated

in line with Treasury’s directive.

• Travel related costs and subsistence and travel (S&T)

were claimed in line with Treasury circular No PT (10).

• Advertising costs for notices were recovered from

applicants and no marketing adverts were placed by the

entity.

• National transversal contract for copiers contributed to

cost reductions.

• Utilisation of an on-line travel system reduces travel and

accommodation costs resulted in savings on S&T claims,

as well as the rationalisation of travel.

• External legal opinions were only sought when

necessary, reducing the costs for outsourced legal

services.

2.3 KEY POLICY DEVELOPMENTS AND

LEGISLATIVE CHANGES

The following policies and legislative changes have a

direct impact on the Board’s regulatory responsibilities and

strategic, annual and operational planning.

KWAZULU-NATAL GAMING AND BETTING AMENDMENT ACT, 2017

In 2017, the KwaZulu-Natal Provincial Legislature amended

the KZN Gaming and Betting Act No. 08 of 2010. The

main motivation for the amendments was to rectify and

strengthen areas of the Act around which litigation revolved

and regarding which threats of litigation existed. Such

amendments included the following:

• The Provincial legislature amplified the Board’s mandate

beyond the specific focus of the horseracing and betting

sector to a broader impact which includes the gaming

industry. This also resulted in amendments in respect of

the horseracing and betting Transformation Fund. The

definitions were also aligned with those contained in

the Broad-Based Black Economic Empowerment Act in

order to align the transformation goals of the Act with

National legislation.

• The provision of clarity around the Province’s policy

allowing for electronic bingo terminals as a game

type within the Province. This was aimed at settling

continuous litigation and to facilitate transformation

and opportunities for Black persons.

• Recognition of other forms of horseracing

(thoroughbred horseracing, standard bred horseracing

and harness racing) which aim to bring into the fold the

rural horseracing industry. Traditional horseracing is a

popular sport in rural communities of KZN, with minimal

support and is not regulated.

• Recognition of technological advancements in gaming

equipment. A number of definitions were inserted in

respect of systems of compulsory standards (SABS),

applicable to gaming equipment to align with National

legislation dealing with compulsory standards (The

National Regulator for Compulsory Specifications Act

No 5 of 2008).

• Issues relating to acquisitions of financial interests in the

gambling industry.

These amendments included additional responsibilities for

the Board and has a direct impact on the regulation of the

industry and operational capacity. As the Board’s mandate

in respect of transformation is no longer limited to the

horseracing and betting industry, the Board’s Transformation

Strategy and Implementation Plan must be revised to

include the Casino, LPM and Bingo sectors. In addition, the

KZN Gaming and Betting Rules are to be revised to ensure

alignment with the Amendment Act as these rules regulate

the operations of the gambling industry. Other forms of

horseracing will need to be incorporated into the Board’s

regulatory activities.

KZN GAMING AND BETTING REGULATIONS 2012

Future amendments to Regulations are expected in order to

align with the Amendment Act.

DRAFT NATIONAL GAMBLING AMENDMENT BILL

The potential impact of the National Gambling Amendment

Bill impacting the Board include the following:

• Clarity around the definition of Bingo, specifically to clarify

the recognition of EBTs as gambling equipment.

• Restrictions on gambling premises and locations of

automated teller machines.

• Responsibilities of the National Gambling Regulator (NGR).

• Restriction in the structure and allocation of bingo licences

and machines.

• Establishment of a self-regulatory body for the Horseracing

Industry.

• Restrictions on betting on local and foreign lottery results,

including sports pools.

• Promotion of broad-based Black economic empowerment

in the gambling industry and mandatory provisions around

the imposition of B-BBEE targets in licence conditions to

advance the objectives of the B-BBEE Act.

• Enforcement provisions in respect of non-compliance

relating to transformation.



29

• Enhancements to advertising restrictions.

• Development of register of unlawful gambling operators to improve the National Self-Exclusion Programme.

• National re-certification of gaming equipment (Draft National Regulations).

• Determination of rates for products belonging to Ttotalisator operators.

• Development of inspectorate to combat illegal gambling activities together with other enforcement agencies.

JOB CREATION

With unemployment being high (unemployment rate in South Africa increased to 27.2 percent in the second quarter of 2018

from 26.7 percent in the previous period according to Trading Economics) ongoing focus must be given to contributions to

the development of sustainable jobs within the gambling industry to alleviate poverty and improve quality of life within the

Province, thereby stimulating economic growth.

Gaming and Betting licensees contribute to job creation provide and access to employment opportunities in the communities

in which gambling operates, thereby encouraging new entrants into the industry within the Provincial economy. Additional

jobs continue to be created through the growth in existing licensed operations. Targets for job creation within the gambling

industry are set by the Board in licence conditions and employment related commitments made by licensees are closely

monitored. The Board stipulates employment conditions for communities, specifying number of jobs for gambling operations

as part of the licensing process.

As at December 2018, a total of 6 578 gambling industry employees are registered with the Board. The Bookmakers and

Totalisators registered employees have increased substantially since 2017/18 (increased by 78%) due to the registration of

Tote Agents. The table below reflects the comparative registered gambling employee statistics within the Province (registered

by the Board in terms of the Act) which illustrates a total growth in employment of registered employees within the gambling

industry within KZN of 11.10% since March 2018.

REPORTED SMME SPEND BY GAMING LICENSEES - 2013/14 TO 2018/2019

REPORTED SMME SPEND BY BETTING LICENSEES - 2016/17 TO 2018/2019

R 1200000 000,00

R 350000 000,00R 300000 000,00

R 250000 000,00

R 200000 000,00

R 150000 000,00

R100000 000,00

R 50000 000,00

R 0,00

R 1000000 000,00

R 800000 000,00

R 600000 000,00

R 400000 000,00

R 200000 000,00

R 0,00

Local Economy

SMME

PDI Business

Local Economy

SMME

PDI Business

2013/14

R 962 714 103,73

R 127 810 072,38

R 593 390 950,40

2016/17

R 195 676 276,40

R 75 617 228,81

R 85 722 972,34

2017/18

R 297 746 502,12

R 281 732 347,71

R 131 535 222,82

2018/19

R 513 892 765,88

R 515 100 542,17

R 235 899 749,60

2014/15

R 954 038 093,69

R 114 673 610,60

R 568 544 589,19

2015/16

R 805 487 931,61

R 256 556 656,67

R 859 682 129,55

2016/17

R 820 003 969,26

R 222 966 191,59

R 846 796 059,77

2017/18

R 338 510 728,00

R 185 649 549,37

R 648 319 777,17

2018/19

R 124 167 202,82

R 138 517 051,00

R 223 626 792,99



30Department:



010002000300040005000600070008000

With the continued roll out of approved gaming and betting licences, it is anticipated that employment opportunities will

continue to increase.

SERVICE DELIVERY DEMANDS

The Board continues to develop the entity’s capacity through the implementation of the Workplace Skills Plan, using

the outcomes of the skills audit undertaken during 2016/17. Improved capacity will result in the improvement in entity

performance. The entity’s operations are very labour intensive and from an operational point of view, increased licensees

mean additional inspections, audits and monitoring, resulting in increased operational costs over the MTEF. The entity

will continue to support a growing gambling industry and meet the demands of increased service delivery and regulatory

activities in respect of:

· Licensing of gambling operations and sites and monitoring once operational.

· Rolling out of new gambling categories such as Bingo and Type B sites.

· Approval of new game types and game changes, especially in the Casino industry.

· Registration of gaming and betting employees and tote agents.

· Monitoring of licensees’ compliance with bid/licence commitments, licence conditions and B-BBEE legislation.

· Stringent enforcement of licence conditions and licence commitments.

· Proactive initiatives to combat illegal gambling in internet cafes and online.

· Verification and collection of gambling taxes payable to Provincial Government in terms of the Act.

· Implementation and administration of the Transformation Fund.

· Implementation of the Black Gambling Industrialist Programme.

MINIMISING THE NEGATIVE SOCIAL IMPACTS OF GAMBLING

There have been challenges that relate to online gaming (Internet, social media) with no formal integrated response. The draft National Norms and Standards dated 23rd May 2014, outlined norms and standards in respect of online gaming which set out that online gaming requires a co-ordinated policy approach. The National Policy Framework has recommended that online gambling remain illegal at this point and that measures be introduced to close down existing operations and prosecute perpetrators. The intention is for all enforcement agencies to jointly ensure the eradication of illegal online gambling. Illegal gambling is growing (increase in online gambling, unlicensed gambling machines and gambling computer terminals and internet cafes) and is impacting on society. The Board has included as part of its Betting Monitoring and Control Programme, a focus towards the eradication of illegal gambling activities in the Province. The strategy will include proactive initiatives to combat illegal gambling in internet cafes and online and to ensure that capabilities are strengthened to combat the scourge of illegal gambling, thereby protecting the interests of the public. Reports of illegal gambling through the Whistle-blower hotline will continue to be investigated. In addition, all reported cases of fraud and corruption within the industry will be investigated. There has been an increase in the complexity of gaming systems and technological advancements within the

gaming industry. General legislative challenges exist in an environment of technology, innovation and development and with

the recent introduction of legislation regarding remote gambling, the Board will engage and input to the proposed gambling

policy and monitor any impact on operations.

Year Casino LPM (Route Operators) BingoBookmakers &

Totalisators Total2014/15 2167 97 311 1170 37452015/16 2643 104 323 1675 47452016/17 2638 103 194 1959 48942017/18 2497 98 294 3032 59212018/19 2481 97 438 3483 6499



31

Protection of the public - Communication related activities have evolved from internal and external communications, to

incorporate initiatives that protect the interests of the public as well as stakeholder engagements. Activities include responsible

gambling and illegal gambling awareness campaigns in communities together with undertaking strategic research projects

which focus on different sectors within the gaming and betting industry. In this vein the KZNGBB commissioned a Socio

Economic Impact Study that was undertaken by the South African Responsible Gambling Foundation. The study reviewed

amongst others, the socio economic impact of gambling on communities within the Province. The study was completed and

published within the 2018/19 Financial Year. Recently, this unit’s function has been broadened to include activities around

corporate social responsibility where building stakeholder relationships with other Government Departments in respect

of socio-economic development within the Province is required. Specific focus during 2019/20 must be given to creating

awareness around the Board’s transformation imperatives and developing appreciation for and knowledge of the industry

amongst communities, particularly those comprised of disadvantaged persons

FINANCIAL INTELLIGENCE CENTRE ACT, AS AMENDED

Sections relating to compliance by licensees with this Act, imposes increased responsibilities for the entity as an “accountable

institution.

3. STRATEGIC OUTCOME ORIENTED GOALS

Enhance the integrity of the Gaming and Betting Industry

GOAL 1: To create a fair regulatory environment that will enable an appropriately regulated and compliant

Gaming and Betting Industry thereby maintaining the integrity of the industry.

Increase inclusive and sustainable economic growth and contribution to job creation and tourism

GOAL 2: To propel participation, access, and Black ownership stakes in line with Provincial demographics; and

the promotion of industry knowledge and skills transfer; SMME and entrepreneurial development of persons

contemplated in the Broad-Based Black Economic Empowerment Act within the Gaming and Betting industry

within the Province.

Grow revenue for Provincial Government and the entity Grow revenue for Provincial Government and the entity

GOAL 3: To grow revenue for the Provincial Government through strategic interventions.

Protect the interests of the Public

GOAL 4: To protect the interests of the Public through facilitation of illegal gambling initiatives in conjunction

with SAPS.

Optimize institutional service excellencec

GOAL 5: To optimise service excellence through accountable governance, effective administrative, human

resources, and financial management services; and efficient delivery of services to industry stakeholders.

In developing the strategic goals and objectives of the Board, cognisance was taken of the Board’s mandate as contained in

the Act as well as strategic priorities of Government (as contained in the National Development Plan (NDP), the Provincial

Growth and Development Strategy, the Provincial Growth and Development Plan (PGDP), the Poverty Eradication Master

Plan; and the Medium Term Strategic Framework). The table below contains the Board’s strategic outcome oriented goals as

per its Strategic Plan, the links to Government’s goals and the progress made towards the achievement thereof. The entity

has successfully contributed, either directly or indirectly, to provincial priorities contained in the NDP, PGDP, PEMP and MTSF

through various interventions undertaken by its Programmes and Sub-Programmes as detailed in the tables below.



32Department:


KZNGBB Strategic Outcome Oriented Goal

KZNGBB Strategic Objective

MTSF Outcome PGDP Goal EDTA Strategic Outcome Oriented Goal

1 ENHANCE THE INTEGRITY OF THE GAMING AND BETTING INDUSTRY

1 To ensure a transformed and regulated gambling industry through the implementation of inclusive growth, economic development and empowerment strategies, effective regulation and co- operative governance

4

7

Decent Employment through inclusive economic growth

Spatial Equity

1

6

Inclusive Economic growth

Governance and Policy

2

3

Inclusive and sustainable economic growth that supports decent employment

Preferred tourism destination in the country

2 INCREASE INCLUSIVE AND SUSTAINABLE ECONOMIC GROWTH AND CONNTRIBUTION TO JOB CREATION AND TOURISM

5. To provide efficient legal advisory services to the entity, to manage entity’s legal risks and litigation, to develop licence conditions that comply with B-BBEE Laws and to institute enforcement proceedings

7 To promote the Board’s strategic imperatives relating to transformation, social and economic development and protection of the public through effective communication, stakeholder engagement services and research

10 To license and register applicants in the Gaming and Betting industry who are deemed suitable and compliant with transformation requirements

11 To ensure a properly regulated, transformed and compliant gambling industry that generates revenue towards the socio-economic development of the Province and provides economic opportunities for previously disadvantaged individuals



33




3. GROW REVENUE FOR PROVINCIAL GOVERNMENT AND THE ENTITY

3 To facilitate revenue growth for the Provincial Government and KZNGBB

4 Decent Employment through inclusive economic growth

Spatial Equity

1 Inclusive Economic growth

Inclusive and sustainable economic growth that supports decent employment

4 PROTECT THE INTERESTS OF THE PUBLIC

12 To combat illegal gambling in the Province

12 An efficient, effective and development oriented public service

6 Governance and Policy

5 Achieve institutional excellence responsive to the needs of the Province

5 OPTIMIZE INSTITUTIONAL SERVICE EXCELLENCE

6 To optimize service excellence through enhanced Human Resource Management services which supports an efficient, ethical, effective and development-oriented public service

12 An efficient, effective and development oriented public service

6 Governance and Policy

Achieve institutional excellence responsive to the needs of the Province

2 To optimise service excellence through strategic leadership, enhanced strategic planning and performance management and executive support

4 To strengthen governance, accountability, risk and compliance management services to ensure a sound internal control environment

6 To optimize service excellence through enhanced Human Resource Management services which supports an efficient, ethical, effective and development-oriented public service



34Department:





8 To provide effective, efficient and transparent financial management services to the entity in compliance with the PFMA and other applicable financial regulations and policies

5

9 To optimize service excellence through compliance with DPSA ICT Governance Framework and improved ICT management services that support the entity in its service delivery



35

4. INTRODUCTIONBelow are the consolidated annual performance results for each Programme/Sub-Programme for the period under review. The

details synopsis of achievements, strategies to overcome areas of underperformance are included in Part B of the Annual Report

as required by Treasury’s Framework for Annual Reports for public entities.

5. PROGRAMME 1: ADMINISTRATIONThe purpose of the Administration Programme is to provide strategic and administrative management and support to the

entity. The Administration Programme is comprised of the following five sub-programmes, namely:

· Sub-Programme 1.1 Office of the CEO

· Sub-Programme 1.2 Governance Risk and Compliance

· Sub-Programme 1.3 Legal Services

· Sub-Programme 1.4 Human Resources

· Sub-Programme 1.5 Communications

5.1 SUB-PROGRAMME 1.1- OFFICE OF THE CEO

The purpose of the sub-programme is to provide leadership, oversight of operations, strategic and administrative support to

Board and management and to ensure management of programme performance information.

STRATEGIC OBJECTIVES ANNUAL TARGETS FOR 2018/19:

SUB-PROGRAMME 1.1: OFFICE OF THE CEO

No. Strategic Objective

Actual Achievement2017/2018

Planned Target2017/2018


Deviation from Planned Target to Actual Achievement for 2018/19

Comment on Deviations

SO1.1 Provide strategic leadership and management to ensure responsive, accountable, and efficient administration and operations

KZNGBB draft and final strategic and annual plans; 4 quarterly performance reports; and annual performance report were produced and submitted

Unqualified audit opinion in respect of performance information

KZNGBB achieved an Unqualified audit opinion findings in respect of performance information

Not applicable Not applicable

SO1.2 Promote economic value, social development and transformation within the gambling industry

Approved Transformation Strategy in place with 4 quarterly transformation progress reports

1 revised Transformation implementation plan by 30 September 2019.

1 revised Transformation implementation plan by 30 September 2019.


36Department:





PI No. Performance Indicator

Actual Achievement 2017/18





Strategic Objective 1.1: Provide Strategic leadership and management to ensure responsive, accountable, and efficient administration and operations

1.1.1.1 Approved 2019/20 Annual Performance Plan by 1 April

Draft and final Strategic and Annual Performance Plans submitted to Executive Authority within prescribed timeframes

Approved Annual Performance Plans by 1 April

Approved Annual Performance Plan submitted by 1 April


1.1.1.2 Number of quarterly Performance reports against APP Targets

4 Quarterly Performance reports submitted to the Executive Authority within 30 days from the end of the quarter

4 Quarterly Performance reports against APP Targets.

4 Quarterly Performance reports against APP Targets.


1.1.1.3 Number of quarterly Regulation 3 reports submitted in compliance with legislative prescripts.

Not Applicable- Not included in 2017/18 APP

4 quarterly Regulation 3 reports produced and submitted in compliance with legislative prescripts.

4 Quarterly Regulation 3 reports submitted in compliance with legislative prescripts.


1.1.1.4 Annual Performance Report submitted to Auditor-General by due date.

Not applicable – not included in 2017/18 APP

Annual performance report produced and submitted to AGSA for audit by due date

Annual Performance Report prepared and submitted to Auditor-General for auditing on 31 May


Strategic Objective 1.2 Promote economic value, social development and transformation within the gambling industry.

1.2.1.1 Number of quarterly Transformation Strategy Implementation Reports

Transformation Strategy and Implementation Plan developed and approved on 24 November 2016 (no amendments thereto required)4 Quarterly transformation progress reports

4 quarterly Transformation Strategy Implementation Reports

4 Quarterly transformation progress reports were presented to Board




37








Strategic Objective 1.1.3 Ensure contribution to National Gambling Policy and co-operative governance and keeping abreast with regulatory, technical and industry developments (Strategic Objective Not Included in 2018/19 APP)

N/A Number of regulatory / industry fora attended to represent KZNGBB

28 Regulatory/industry fora attended by the CEO to represent KZNGBB

Strategic Objective Not Included in 2018/19 APP

Not applicable Not applicable Not applicable

5.2 SUB-PROGRAMME 1.2 - GOVERNANCE RISK AND COMPLIANCE

The purpose of the sub-programme is to implement governance, risk and compliance programmes to ensure that the entity

continues to operate within the boundaries of relevant legislation and governance best practice for public entities


Strategic Objective Indicator






Strategic objectives annual targets for 2018/19 : sub-programme 1.2 – Governance risk and compliance

SO.1.3 Provide governance, Risk and compliance management service to ensure a sound internal control environment.

1.3.1 Number of Board/Board Committee meetings supported

Annual review of 7 Governance structures and 5 governance policies and 40 meetings held to give effect to the entity’s statutory mandate

30 Board meetings supported

40 Board/Committee meetings supported


1.3.2 Number of Strategic Risk Management Plans produced within timeframes

1.Strategic Risk Plan produced by 30 September 2018

1.Strategic Risk Plan produced by 30 September 2018


1.3.3 Number of Fraud Susceptibility Assessment Reports produced within timeframe

Fraud susceptibility report produced by 31 March 2019

Fraud susceptibility report produced by 31 March 2019


1.3.4 Compliance Awareness Training Program Developed by 30 December 2018

Compliance Awareness Training Programme developed by 30 December 2018

Compliance Awareness Training Programme developed by 30 December 2018


N/A Management of enterprise risk and compliance in line with relevant legislation

Assessment of enterprise risk and production of risk management plans and Compliance Framework reviewed

Not included as a Separate Strategic Objective in 2018/2019

Not Applicable Not applicable Not applicable



38Department:


SUB-PROGRAMME 1.2 – GOVERNANCE RISK AND COMPLIANCE







Strategic Objective 1.3 Provide governance, risk and compliance management services to ensure a sound internal control environment

1.3.1.1 Number of Resolution Registers updated within 10 working days of Board/Committee Meetings

7 Board / Committee Charters reviewed and updated and 5 Governance policies reviewed/developed

30 Resolution Registers updated within 10 working days of Board/Committee Meetings


100% of target achieved.

Positive variance of additional 10 meetings held and registers up-dated.

Not applicable

1.3.1.2 Number of quarterly Board Resolutions Status Reports

40 Board and Board Committee meetings held: 11 Board meetings 29 Board Committee meetings

4 quarterly Board Resolutions Status Reports

4 quarterly Board Resolutions Status Reports were prepared


1.3.2.1 Annual Strategic Risk Registers produced by 30th September

No target under this Performance Indicator in 2017/18

Annual Strategic Risk Registers produced by 30th September.

100% achieved Annual Strategic Risk Registers produced by 30th September.


1.3.3.1 Number of Fraud and corruption training sessions


2 Fraud and corruption training sessions

2 Fraud and corruption training sessions took place,


1.3.4.1 Number of Compliance Awareness training sessions


2 Compliance Awareness training sessions

2 Compliance Awareness training sessions took place,


Strategic Objective 1.2.2: Management of enterprise risk and compliance in line with relevant legislation

N/A Annual enterprise risk assessment and strategic risk management plan

No target under this Performance Indicator in 2018/19. Indicator moved to 1.3.2.1

Not applicable Not applicable Not applicable Not applicable

N/A Number of compliance risk management plans



N/A Reviewed Fraud Prevention Plan





39

SUB-PROGRAMME 1.2 – GOVERNANCE RISK AND COMPLIANCE







Strategic Objective 1.3 Provide governance, risk and compliance management services to ensure a sound internal control environment

1.3.1.1 Number of Resolution Registers updated within 10 working days of Board/Committee Meetings

7 Board / Committee Charters reviewed and updated and 5 Governance policies reviewed/developed



100% of target achieved.

Positive variance of additional 10 meetings held and registers up-dated.

Not applicable

1.3.1.2 Number of quarterly Board Resolutions Status Reports

40 Board and Board Committee meetings held: 11 Board meetings 29 Board Committee meetings

4 quarterly Board Resolutions Status Reports

4 quarterly Board Resolutions Status Reports were prepared


1.3.2.1 Annual Strategic Risk Registers produced by 30th September


Annual Strategic Risk Registers produced by 30th September.

100% achieved Annual Strategic Risk Registers produced by 30th September.


1.3.3.1 Number of Fraud and corruption training sessions


2 Fraud and corruption training sessions

2 Fraud and corruption training sessions took place,


1.3.4.1 Number of Compliance Awareness training sessions


2 Compliance Awareness training sessions

2 Compliance Awareness training sessions took place,


Strategic Objective 1.2.2: Management of enterprise risk and compliance in line with relevant legislation

N/A Annual enterprise risk assessment and strategic risk management plan



N/A Number of compliance risk management plans



N/A Reviewed Fraud Prevention Plan



5.3 SUB-PROGRAMME 1.3 LEGAL SERVICESThe purpose of the sub-programme is to provide in-house legal resources for the Board and management and to ensure that the

Board’s regulation of the gambling industry in the Province complies with and conforms to legislation and regulatory requirements.

SUB-PROGRAMME 1.3 – LEGAL SERVICESNo. Strategic

ObjectiveStrategic Objective Indicator






SO 1.4

Provide legal advisory services to manage entity’s legal risks, exposure and licensee/registrant discipline within the gambling industry

1.4.1 Number of Legal Reports appraising Board of Legal matters managed

39 Legal opinions / advice were provided within timeframes and legal matters reported to Board in 9 Legal Reports

8 Legal Reports to Board

9 Legal Reports submitted to Board

1 additional report produced

Not applicable

1.4.2 Percentage of identified licensee/registrant contraventions processed

No target was set in 2017/18 under this Strategic Objective Indicator 1.4

100% identified licensee/registrant contraventions processed

100% identified licensee/registrant contraventions processed


N/A Regulation of the industry through legislative amendments and licensee discipline for non-compliance

Target for 2018/19 amended and incorporated in strategic indicator 1.4.

1 Submission for amendments (100%) was prepared and submitted within prescribed timeframes; and 10 charge sheets / 3 warning letters (100%) were prepared within prescribed timeframes


N/A Promote licensee contribution to B-BBEE, employment and socio-economic development through licence conditions

Target for 2018/19 amended and incorporated in strategic indicator 1.4.

B-BBEE, employment and socio-economic development related licence conditions were developed for 7 approved licences (100%); and 86 existing licence conditions were reviewed (100%)




40Department:


SUB-PROGRAMME 1.3 LEGAL SERVICES







Strategic Objective 1.4: Provide legal advisory services to manage entity’s legal risks, exposure and licensee/registrant’s discipline within the gambling industry.

1.4.1.1 Percentage of legal opinions/advice furnished to Board and management within 21 days of request.

100% of 39 legal to opinions/advice furnished Divisions within prescribed timeframes

100% of legal opinions/advice furnished to Board and management within 21 days of request

100%% of legal opinions/advice furnished to Board and management within 21 days of request

Not Applicable Not Applicable

1.4.1.2 Percentage of proposals for amendments to National and Provincial legislation submitted within prescribed timeframe

This performance indicator target fell under a separate Strategic Objective in 2017/18. This has since been amended.

100% of proposals for amendments to National and Provincial legislation submitted within prescribed timeframe

100% of proposals for amendments to National and Provincial legislation was submitted within prescribed timeframes

Not Applicable Not applicable

1.4.1.3 Percentage of existing licence conditions reviewed annually

New performance indicator set in 2018/19

100% of existing licence conditions reviewed annually

100% of existing licence conditions were reviewed in the year


1.4.2.1 Percentage of charge sheets/warning letters issued to licensees/registrants within 1 month of initiation by units

Performance Indicator target was amended and moved from Strategic Objective 1.3.2 to strategic Objective 1.3.1

100% of Charge Sheets and 3 warning letters issued to licensees within prescribed time frames.

100% of charge sheets/warning letters issued to licensees/registrants within 1 month of initiation by units

78% of charge sheets/warning letters issued to licensees/registrants within 1 month of initiation by units

Target Not achieved by 22% (3 out of 14 charge sheets/ warning letters) were issued beyond time frames.

Human Resources Capacity within legal unit.

1.4.2.2 Percentage of non-compliance Section 87 Enquiries findings communicated to licensees/registrants within 10 working days of Board decision

Not Applicable – not included in 2017/18 APP as target

100% of non-compliance Section 87 Enquiries findings communicated to licensees/registrants within 10 working days of Board decision

100% of non-compliance Section 87 Enquiries findings communicated to licensees/registrants within 10 working days of Board decision.




41

SUB-PROGRAMME 1.3 LEGAL SERVICES







Strategic Objective 1.3.2: Regulation of the industry through legislative amendments and licensee applicable discipline for non-compliance (Not Included in 2018/19 APP)

N/A Percentage of charge sheets/warning letters issued to licensees within prescribed timeframes

100% of Charge Sheets and 3 warning letters issued to licensees within prescribed time frames.

Not Applicable – not included in 2018/19 as separate Strategic Objective. target included in Strategic Objective 1.4.2.1


N/A Percentage of timely submissions of amendments to applicable Provincial and National legislation

Timely submission of 100% (1 out of 1) of amendments to applicable Provincial and National legislation – Amendment to the KwaZulu-Natal Gaming and Betting Regulations

Not Applicable – not included in 2018/19 APP as separate target. moved to 1.4.1.2 Performance Indicator Target


Strategic Objective 1.3.3: Promote licensee contribution to B-BBEE, employment and socio-economic development through licence conditions (Not Included in 2018/19 APP)

N/A Percentage of approved licences containing licence conditions in terms of the National Gambling Act

100% of 7 approved licences contain conditions which address Section 53(c) of the National Gambling Act

Not Applicable – not included in 2018/19 APP as a separate strategic objective indicator target. It is reported under Strategic Objective 1.4.1.3


N/A Percentage of existing licence conditions reviewed annually

100% of 86 existing licence conditions reviewed during 2017/18

Not Applicable – not included in 2018/19 APP as target




42Department:


SUB-PROGRAMME 1.4 HUMAN RESOURCES


Actual Achieve-ment 2017/2018


Actual Achieve-ment2018/2019



Strategic Objective 1.5 Provide human resource management services to ensure that appropriately skilled human re-sources are in place

1.5.1.1 Number of quar-terly HR Strategy Implementation Reports sub-mitted to HRR Committee


4 quarterly HR Strategy Implementation Reports sub-mitted to HRR Committee

4 quarterly HR Strategy Implementation Reports were submitted to HRR Committee


1.5.1.2 Average percent-age of vacant funded posts

Maintained an average vacancy rate of 11.25% during 2017/18

Maintain a vacan-cy rate of 10% or less annually

Maintained an average vacancy rate of 6.84% during 2018/19


N/A Percentage of performance agreements and appraisals submitted within prescribed time-frame

Achieved 89.81% submis-sion of signed performance agreements and appraisals by due dates

Not included in 2018/19 APP , target moved to Operational Plan


5.4 SUB-PROGRAMME 1.4 HUMAN RESOURCES

The purpose of the sub-programme is to ensure implementation of the human resources strategy by attracting, developing and

retaining suitably qualified and competent human resources for the Board.

SUB-PROGRAMME 1.4 – HUMAN RESOURCESNo. Strategic

ObjectiveStrategic Objective Indicator






SO 1.5

Provide human resource management services to ensure that appropriately skilled human resources are in place

1.5.1 Number of revised HR Strategy Implementation Plans by due dates

HR Strategy implemented and progress reported to Board/HR Sub-Committee (vacancy rate maintained at average of 11.25%; recruitment of 5 new staff in accordance with the requirements of the Act; skills development through implementation of the WSP; and performance agreements in place and performance reviews undertaken)

1 revised HR strategy implementation plan by 31 March 2019

1 revised HR Strategy Implementation Plans by due date




43

SUB-PROGRAMME 1.4 HUMAN RESOURCES


Actual Achieve-ment 2017/2018


Actual Achieve-ment2018/2019



1.5.1.3 Percentage of annual declara-tion of financial interests by staff of the Board

Performance Indicator Target not included in 2017/2018 APP –Not Applicable

95% of annual declaration of financial interests by staff of the Board

91% of annual declaration of financial interests by staff of the Board undertak-en (71 out of 78 forms submitted timeously.

4% declarations not undertak-en within time periods

Delays by unit

1.5.1.4 Percentage targets of Work-place Skills Plan achieved

62% of Workplace Skills Plan targets achieved - (13 out of 21 planned training initia-tives undertaken

60% of Workplace Skills Plan targets achieved

55% of Workplace Skills Plan targets achieved - (47 out of 85 planned training initia-tives undertaken)

Negative variance of 5%

No training interven-tions were undertaken during Q3 due to HR capacity constraints

5.5 SUB-PROGRAMME 1.5 COMMUNICATIONS

The purpose of the sub-programme is to address the communication requirements of all stakeholders, both internally and externally,

through stakeholder engagement using different communication mechanisms.

SUB-PROGRAMME 1.5: COMMUNICATIONS


Strategic Objective Indicator






SO 1.6

Provide communication and stakeholder engagement services to promote internal and external communications.

1.6.1 Number of revised Communication Strategy Implementation Plans by due dates

Communications Strategy in place and implemented through: facilitation of 10 awareness campaigns; 6 entity newsletters published; 30 stakeholder engagements undertaken; and social impact study conducted

1 revised Communications Strategy Implementation Plan by 31 March 2019

1 revised Communication Strategy Implementation Plans by due date

Not applicable

Not applicable



44Department:


SUB-PROGRAMME 1.5: COMMUNICATIONS







Strategic Objective 1.6: Provide communication and stakeholder engagement services to promote internal and external communications

1.6.1.1 Number of quarterly Communications Strategy Implementation Reports submitted to CEO


Number of quarterly Communications Strategy Implementation Reports submitted to CEO

4 quarterly Communications Strategy Implementation Reports submitted to CEO


1.6.1.2 Number of public awareness campaigns or related initiatives undertaken


3 public awareness campaigns or related initiatives

23 public awareness campaigns - 17 responsible gambling awareness (SARGF School Awareness Programme)

Positive variance of 20 awareness campaigns

Additional initiatives undertaken with SARGF: Schools Awareness Programme and “Responsible Gambling month”

N/A Number of internal and external newsletters published

4 internal and 2 external newsletters published

Not applicable – not included in 2018/19 APP – Moved to operational plan


N/A Social Impact Study conducted

Social Impact Study Draft 1 Report was submitted by SARGF by 31 March 2018

Social Impact Study conducted within prescribed timeframe applicable – not included in 2018/19 APP – Moved to operational plan


1.6.1.3 Number of stakeholder engagements facilitated/ undertaken

30 Stakeholder engagements undertaken

20 stakeholder engagements

26 stakeholder engagements facilitated/undertaken

Positive variance of 6 stakeholder engagements

6 Unplanned engagements were undertaken

PROGRAMME 1 : LINKING PERFORMANCE WITH BUDGETS2018/2019 2017/2018

SUB-PROGRAMME NAME BUDGETACTUAL

EXPENDITURE

(OVER)/UNDER

EXPENDITURE BUDGETACTUAL

EXPENDITURE

(OVER)/UNDER

EXPENDITURE

R’000 R’000 R’000 R’000 R’000 R’000

Office of the CEO 3 759 3 453 306 3 224 2 852 372

Governance, Risk & Compliance 7 392 7 423 -31 7 276 6 483 793

Legal Services 6 414 7 865 -1 451 3 297 3 427 -130

Human Resources 5 645 3 785 1 860 6 099 4 557 1 542

Communications 2 075 1 602 473 1 244 857 387

TOTAL 25 285 24 128 1 157 21 140 18 176 2 964



45

6. PROGRAMME 2: FINANCEThe purpose of the programme is to support the entity by the provision of financial administration, asset management and

procurement services. This programme is also responsible for managing the relationship between the internal auditing services

provided to the KZNGBB. The functions within this programme include: Supply Chain Management, Cost and Management

Accounting and Financial Accounting.

PROGRAMME 2: FINANCE







SO 2.1

Provide effective, efficient and transparent financial management services to the entity

Unqualified audit opinion

Achieve unqualified audit opinion from the Auditor-General through compliance with legislative frameworks relating to finances

Unqualified audit opinion


N/A Ensure effective financial reporting in accordance with legislative requirements

Compliance with timely submission of Unaudited Financial Statements; Annual Report and quarterly reports

Not Applicable – not included in 2018/19 APP as a separate strategic objective indicator target.


N/A Implement an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost-effective

Annual Procurement Plan and SCM Policy in place to ensure an appropriate procurement and provisioning system

Not Applicable – not included in 2018/19 APP as a separate strategic objective indicator target.









Strategic Objective 2.1: Implement systems of financial management and internal controls in line with statutory/regulatory requirements

2.1.1.1 Number of quarterly financial reports submitted within 1 month of reporting period

4 quarterly reports submitted within 1 month of reporting period.

4 quarterly reports submitted within 1 month of reporting period

4 quarterly reports submitted within 1 month of reporting period.




46Department:









2.1.1.2 Percentage of invoices settled within 30 days

Indicator was not included in 2017/18 APP

95% of invoices settled within 30 days

96% of invoices settled within 30 days

Target achieved Not applicable

2.1.1.3 Approved budget submitted to KZN Treasury by 31 March 2019

Approved budget submitted to KZN Treasury by 31 March 2019




2.1.1.4 Annual Report for preceding year submitted to the MEC and Auditor General by end August

Annual Report for preceding year submitted to the MEC and Auditor General by end August

Annual Report for preceding year submitted to the MEC and Auditor General by end August

Annual Report for 2017/18 submitted to the MEC and Auditor General 31 August 2018


Strategic Objective 2.2 Ensure effective financial reporting in accordance with legislative requirements (Strategic Objective not Included in 2018/2019)

2.2.1 Timely submission of Unaudited Financial Statements to the Auditor-General and KZN Treasury

Approved Annual Financial Statements submitted to Auditor-General and Provincial Treasury on 31 May 2017

Unaudited Financial Statements submitted to the Auditor-General and KZN Treasury by 31 May 2018

Unaudited Financial Statements submitted to Auditor-General and KZN Treasury on 31 May 2018


2.2.2 Timely submission of Annual Report to KZN Treasury and the Auditor-General

Annual Report prepared and submitted to Provincial Treasury and Auditor-General within prescribed timeframe

Annual Report submitted to KZN Treasury and the Auditor-General by 31 August 2018

Annual Report submitted to Honourable Premier, KZN Treasury and Auditor-General by 31 August 2018


2.2.3 Number of Quarterly reports submitted to the responsible MEC as specified in the PFMA and SLA

4 Quarterly reports submitted to the responsible MEC in compliance with the PFMA and Service Level Agreement

4 Quarterly reports submitted within 1 month of the reporting period

4 Quarterly reports submitted within 1 month of the reporting period


Strategic Objective 2.3: Implement an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost-effective

2.3.1 Approved Procurement Plan

2017/18 Procurement Plan approved on 29 March 2018

2018/19 Procurement Plan developed for approval by 31 March 2018

2019/20 Procurement Plan approved on 28 February 2019




47



EXPENDITURE

(OVER)/UNDER


EXPENDITURE

(OVER)/UNDER

EXPENDITURE

R’000 R’000 R’000 R’000 R’000 R’000

Financial management 26 059 18 952 7 107 18 925 13 688 5 237

7. PROGRAMME 3: INFORMATION AND COMMUNICATION TECHNOLOGYThe purpose of the programme is to provide information and communication technology (ICT) and knowledge management

services to the entity.

PROGRAMME 3: INFORMATION AND COMMUNICATION TECHNOLOGY







SO 3.1

Provide efficient information communication and technology.

ICT Strategy and Implementation Plan reviewed and 85.71% of planned activities implemented as per the plan

1 revised ICT Strategy Implementation Plan by 31 March 2019

1 revised ICT Strategy Implementation Plan by 31 March 2019


N/A Comply with the Corporate Governance of Information and Communication Technology Policy Framework

Achievement of level 2 compliance in terms of DPSA within prescribed timeframe

No Target set on Strategic Indicator, moved to operational plan in 2018/19


N/A Implementation of the KZNGBB Gambling Regulatory Online Portal

70% of KZNGBB Gambling Regulatory Online Portal Project activities implemented in terms of Project Plan as per target










Strategic Objective 3.1: Implementation of the ICT Strategy that is aligned with business strategy

3.1.1 Quarterly ICT Strategy Implementation reports


4 Quarterly reports 4 Quarterly reports submitted


N/A Percentage achievement of ICT Strategy implementation






48Department:









Strategic Objective 3.2: Comply with the Corporate Governance of Information and Communication Technology Policy Framework

N/A Level 2 compliance achieved as per DPSA and ICT Policy Framework

Existing ICT Policy Framework is in line with DPSA and activities implemented in accordance with the framework



Strategic Objective 3.3: Implementation of the KZNGBB Gambling Regulatory Online Portal

N/A Percentage achievement of KZNGBB Gambling Regulatory Online Portal project implementation

100% of BPR project activities implemented (accumulative) in terms of the Project Plan



PROGRAMME 3: LINKING PERFORMANCE WITH BUDGETS

2018/2019 2017/2018


EXPENDITURE

(OVER)/UNDER


EXPENDITURE

(OVER)/UNDER

EXPENDITURE

R’000 R’000 R’000 R’000 R’000 R’000

Information,Communication & Technology 9 688 6 926 2 762 7 146 4 946 2 200

8. PROGRAMME 4: LICENSING AND REGISTRATION8.1. SUB-PROGRAMME 4.1: LICENSING AND REGISTRATION - BETTING

The purpose of the sub-programme is to receive, investigate and prepare licences and registration certificates for all applications

in the Betting sector (Racecourse Operators, Totalisator, and Bookmaker sectors) as required in the Act to ensure the suitability and

continuous suitability of all applicants; and to roll out new betting initiatives.

SUB-PROGRAMME 4.1: LICENSING AND REGISTRATION: BETTING


Strategic indicator




Deviation from Planned Target to Ac-tual Achieve-ment for 2018/19


SO 4.1

Licensing and Registration of approved suit-able applicants.

Percentage of corporate licenses and certificates of registration issued to approved suit-able applicants

No target was set in 2017/18 APP

100% of license and corporate certificates of registrations applicants probed to en-sure they are fit and proper

92.14% of corporate licenses and certificates of registration issued appli-cants that are fit and proper.

7.86% not achieved

Processes still manual in some cases.



49


No. Indicator title Actual Achievement 2017/18





4.1.1.1 Percentage of corporate licence and registration applications processed within prescribed timeframes.

Applications processed within prescribed timeframes:Corporate licence and registrations - 85.71% (18 out of 21) Betting sector employee and Tote Agent registrations - 22.49% (228 out of 1014).

70% of corporate licence applications processed within prescribed time frames.

92% (23 out of 25) of all Corporate licence applications processed within prescribed timeframes.

Target achieved and exceeded by 22%

Planned Target in APP was achieved due to the GROP System (Automation)

4.1.1.2 Percentage of applications for employee registration processed within prescribed timeframes.

Licences and corporate/employee certificates of registration issued within prescribed timeframes:Corporate licences - 50% (3 out of 6)

60% of applications for employee registrations processed within prescribed time frames.

8.77% (104 out of 1186) Employee registrations applications received processed within prescribed timeframes.

712 applications is 60% of 1186. (Planned target is 60% of employee registration applications processed and investigated within prescribed time frames)

Target not achieved and 91.23% (1082 applications) were processed beyond time frames).

Reasons for Non Achievement include that these were considered as low risk and not a priority.

4.1.1.3 Percentage of corporate licences and certificates of registration issued within prescribed time frames.

50% (3 outof 6) of licencesand corporatecertificates ofregistrationissued withinprescribedtimeframes.

100% of corporate licence applications and certificates of registration processed within prescribed time frames.

0% of corporate licence applications and certificated of registrations were processed within prescribed time frames:

Licences and corporate/employee certificates - 0% (0 out of 1)

Target not achieved as 1 corporate licence application was received during the year and not processed and investigated within prescribed time frames.

Target Not Achieved

Reasons for Non Achievement include that there were external dependencies resulting in delays in seeking necessary approvals for the unit.

4.1.1.4 Percentage of Certificates of Registration for employees issued within prescribed time frames.

Betting employees and Tote Agent certificates - 100% (1013 out of 1013)

70% of Certificates of Registration for employees issued within prescribed time frames.

100% (1139 out of 1139) of Certificates of Registration for employees issued within prescribed time frames.

Not Applicable Not Applicable



50Department:








4.1.1.5 Percentage of renewed licence/ Certificates issued within prescribed timeframes.

Applications for renewal of licence/ certificate processed and licences/certificates issued before expiry - 65.93% (178 out of 270)

100% of renewed licences/ Certificates issued within prescribed timeframes.

75.68% (112 out of 148) of renewed licences/ Certificates issued within prescribed timeframes.– 75.68%

Target not achieved and 24.32% (36 out of 148) of renewed licences/certificates processed and issued beyond time frames.

Planned Targets Not Achieved

Renewal of licence certificates finalized outside time frames.

4.1.1.6 Percentage of Corporate licence and registration applicants probed on B-BBEE/Transformation and socio-economic commitments

100% (14 out of 14) of corporate applications finalised contain applicants’ B-BBEE status

100% of corporate licence applicants probed on B-BBEE/Transformation and socio-economic commitments status.

100% 0f corporate licence applicants probed on B-BBEE/Transformation status.


8.2. SUB-PROGRAMME 4.2: LICENSING AND REGISTRATION: GAMING

The purpose of the sub-programme is to receive, investigate and prepare licences and registration certificates for all applications

in the Gaming sector (Casinos, LPMs and Bingo) as required by the Act to ensure the suitability and continuous suitability of all

applicants; and to roll out new gaming initiatives.

SUB-PROGRAMME 4.2: LICENSING AND REGISTRATION: GAMING






4.2.1.1 Percentage of corporate license and registration applications processed within prescribed timeframes

70.53%(67 out of 95) of corporate license and registration applications processed within prescribed timeframes

70% of corporate license and registration applications processed and investigated within prescribed timeframes

57.69% (75 out of 130 corporate license and registration applications processed within prescribed timeframes)

Target not achieved, 12.31% (16 out of 130) applications were processed beyond the timeframes

Target not achieved. Applications were processed after the timeframes.

4.2.1.2 Percentage of Applications for employee registrations processed within prescribed timeframes.

78.70% (340 out of 432) of applications for employee registrations in Casino, Bingo and LPM industry processed and investigated within prescribed timeframes

60% of applications for employee registrations processed within prescribed timeframes.

58.37% (272 out of 466) applications for employee registrations processed within prescribed timeframes.

Target not achieved and 1.63% (8 out of 466 applications) were processed beyond time frames

Reasons for Non Achievement include that these were considered as low risk and not a priority.



51

SUB-PROGRAMME 4.2: LICENSING AND REGISTRATION: GAMING






4.2.1.3 Percentage of corporate licences and corporate certificates of registration issued within prescribed time frames.

98.59% (70 out of 71) of licences and/or corporate certificates of registration issued within prescribed timeframes

100% of corporate licences and certificates of registration issued within prescribed time frames.

97.14% (102 out of 105) of corporate licences and certificates of registration issued within prescribed time frames:

Target not achieved 2.86% (3 out of 105) corporate licence and certificates of registration within prescribed time frames.

Reasons for Non Achievement include that there were external dependencies resulting in delays in seeking necessary approvals for the unit.

4.2.1.4 Percentage of Certificates of Registration for employees issued within prescribed time frames.

99.53% (420 out of 422) of employee certificates of registration issued within prescribed timeframes

70% of Certificates of Registration issued within prescribed time frames.

100% (461 out of 461) of Certificates of Registration issued within prescribed time frames:


4.2.1.5 Percentage of renewed licences/ Certificates issued within prescribed timeframes.

Applications for renewal of licence/ certificate processed and licences/certificates issued before expiry - 65.93% (178 out of 270)

100% renewed licences/ Certificates issued within prescribed timeframes..

100% (627out of 627) renewed licences/ Certificates issued within prescribed timeframes.


4.2.1.6 Percentage of corporate licence applicants probed on B-BBEE/Transformation and socio-economic commitments status.

100% (2 out of 2) of corporate applications finalised contain applicants’ B-BBEE status




PROGRAMME 4 : LINKING PERFORMANCE WITH BUDGETS2018/2019


EXPENDITURE

(OVER)/UNDER


EXPENDITURE

(OVER)/UNDER

EXPENDITURE R’000 R’000 R’000 R’000 R’000 R’000Senior Manager 1 382 730 652 1 269 1 245 24Betting 4 523 5 250 -727 4 305 3 249 1 056Gaming 4 542 3 107 1 435 4 317 4 125 192TOTAL 10 447 9 087 1 360 9 891 8 619 1 272



52Department:


CASINO MONTHLY GGR

R400000 000,00

R350000 000,00

R300000 000,00

R250000 000,00

R200000 000,00

R150000 000,00

R100000 000,00

R50000 000,00

R0,00APR MAY JUNE JULY AUG SEP OCT NOV DEC JAN FEB MAR

CASINO MONTHLY GAMING TAXES

0

2017/18

2017/18

2018/19

2018/19

5 00 000

10 000 000

15 000 000

20 000 000

25 000 000

30 000 000

35 000 000

40 000 000

45 000 000

60 000 000

9. PROGRAMME 5: GAMING MONITORING AND COMPLIANCE 6.1: SUB-PROGRAMME: MONITORING & GAMING AUDIT

The purpose of the sub-programme is to monitor gaming activities in the Province; audit gaming revenue collection for the Province;

and to enforce compliance with relevant legislation.

APR MAY JUNE JULY AUG SEP OCT NOV DEC JAN FEB MAR



53

ROUTE OPERATOR MONTHLY GGR

R70000 000,00

R60000 000,00

R50000 000,00

R40000 000,00

R30000 000,00

R20000 000,00

R10000 000,00

R0,00

2018/19


ROUTE OPERATOR MONTHLY GAMING TAXES

12 000 000

10 000 000

8 000 000

6 000 000

4 000 000

2 000 000

0

2017/18

2017/18

2018/19


BINGO OPERATORS MONTHLY GGR

10 000 000

9 000 000

8 000 000

7 000 000

6 000 000

5 000 000

4 000 000

3 000 000

2 000 000

1 000 000

0

2017/18 2018/19

APR MAY JUNE JULY AUG SEP OCT NOV DEC JAN FEB MARAPR MAY JUNE JULY AUG SEP OCT NOV DEC JAN FEB MAR



54Department:


2017/18 2018/19

BINGO OPERATORS MONTHLY - LPM’S GGR

12 0000

10 0000

8 0000

6 0000

4 0000

2 0000

0APR MAY JUNE JULY AUG SEP OCT NOV DEC JAN FEB MAR

BINGO OPERATORS MONTHLY - LPM’S TAXES

1 800 000

1 600 000

1 400 000

1 200 000

1 000 000

800 000

600 000

400 000

200 000

0APR MAY JUNE JULY AUG SEP OCT NOV DEC JAN FEB MAR

2017/18 2018/19

BINGO OPERATORS MONTHLY TAXES

300 000

250 000

200 000

150 000

100 000

50 000

0

0


2017/18

2017/18

2018/19

2018/19



55

SUB-PROGRAMME 5.1: MONITORING AND GAMING AUDIT







SO.5.1 Ensure the completeness of gaming taxes payable to the Provincial Revenue Fund

100% of planned monthly tax audits conducted:60 Casino48 Route Operator82 Bingo21 Bingo with LPMs

12 monthly Gaming Tax Compliance Reports

12 Monthly Gaming Tax Compliance Reports


SO.5.2 Maintain regulatory and technical compliance in the gambling industry

100% of planned annual compliance audits and FIC inspections conducted on gaming licensees -Compliance audits:5 Casino 4 Route Operator250 LPM sites7 Bingo

FIC inspections:5 Casino 4 Route Operator7 Bingo

1 annual Gaming Regulatory Compliance Monitoring Plan

1 annual Gaming Regulatory Compliance Monitoring Plan


SO.5.2 No target was set out in 2017/18 in respect of this Strategic Objective Indicator

Percentage of new compliant gaming operations certified against licensee compliance reports

100% of new compliant operations certified


SO.5.3 Protect the interests of the public within the gambling industry

No target was set out in 2017/18 in respect of this Strategic Objective Indicator

100% of gaming related disputes / complaints lodged are investigated and outcomes determined

100% of gaming related disputes / complaints lodged are investigated and outcomes determined




56Department:


SUB-PROGRAMME 5.1: MONITORING AND GAMING AUDIT







Strategic Objective 5.1: Ensure the completeness of gaming taxes payable to the Provincial Revenue Fund

5.1.1.1 Percentage of monthly gaming tax verification reports compiled on operational gaming licensees

60 Casino and 48 Route Operators monthly tax audits conducted

100% of monthly gaming tax verification reports compiled on operational gaming licensees

100% of monthly gaming tax verification reports compiled on gaming licensees:

5 Casinos -60 verification reports 4 Route Operators -48 verification reports

9 Bingo - 94 verification reports


Strategic Objective 5.2: Maintain regulatory and technical compliance in the gaming industry

5.2.1.1 Number of compliance inspection checklists in respect of gaming inspections

5 Casino compliance audits 4 Route Operator compliance audits 5 Casino FICA inspections 4 Route Operator FICA inspections

136 compliance inspection checklists in respect of gaming inspections

136 compliance inspection checklists in respect of gaming inspections were conducted.120 LPM site audits8 FIC Audits8 Compliance Audits


5.2.1.2 Percentage of gaming related change requests/applications processed within prescribed timeframe

250 LPM sites compliance audits

100% of operational change request applications processed in compliance with legislation

50/59 = 84.75% of operational change request applications processed in compliance within timeframes.

9/59 = 15.25 % of operational change request applications processed outside of time frames.

Applications relating to EBT related change requests processed outside timeframes due to need to consider additional requirements.

5.2.1.3 Number of transformation monitoring reports in respect of gaming licensees

20 Casino and 16 Route Operator monitoring audits / Monitoring audits conducted on 100% of licensed operational Bingo Halls

48 transformation monitoring reports 20 Casino reports16 Route Operator reports12 Bingo reports

48 transformation monitoring reports 20 Casino reports16 Route Operator reports12 Bingo reports




57

9.2. SUB-PROGRAMME 5.2: GAMING CONTROL

The purpose of the sub-programme is to control all forms of gaming operations through regulatory inspections, certifications

and processing of gaming applications thereby ensuring that gaming operations are conducted in compliance with legislation.

STRATEGIC OBJECTIVE 5.2: MAINTAIN REGULATORY AND TECHNICAL COMPLIANCE IN THE GAMING INDUSTRY







5.2.1.4 Number of compliance inspection checklists in respect of gaming inspections

100% of planned gaming operation inspections were conducted:30 Casino7 Bingo

Additional special certifications: 1 Casino1 Bingo

100% of LPM sites and limited payout machines certified:42 LPM sites187 LPMs

37 compliance inspection checklists

39 compliance checklists(18 inspection checklists and 21 certification checklists)

2 additional certifications

New systems upgrades

5.2.1.5 Percentage of gaming related change requests/applications processed within prescribed timeframe

100% of planned gaming operation inspections were conducted:30 Casino7 Bingo

Additional special certifications: 1 Casino1 Bingo

100% of LPM sites and limited payout machines certified:42 LPM sites187 LPMs

100% of gaming related change requests/applications processed within prescribed timeframe

1379/1391 = 99% gaming related change requests processed within timeframe.

12/1391 = 1% gaming related change requests processed out of time

12 gaming related change requests out of time due to bingo saturation and roll out

Bingo litigation

5.2.2.1 Percentage of new compliant gaming sites and gaming machines certified within prescribed timeframe

100% (493 out of 493) of gaming operational change requests were processed and evaluated

100% of new compliant gaming sites and gaming machines certified within prescribed timeframe

100% of new compliant gaming sites and gaming machines certified within prescribed timeframe99 sites469 gaming machines




58Department:


TAXES - BOOKMAKERS AND TOTALISATORS

0

2017/18 2018/19

16 000 000

14 000 000

12 000 000

10 000 000

8 000 000

6 000 000

4 000 000


10. PROGRAMME 6: BETTING MONITORING AND CONTROLThe purpose of the sub-programme is to monitor betting activities in the Province; verify betting revenue collection for the Province;

enforce compliance with relevant legislation; and to ensure that the Board’s mandate in respect of the eradication of illegal gambling

in the Province is carried out.

SUB-PROGRAMME 5.2 : GAMING CONTROL







Strategic Objective 5.3: Protect the interests of the public within the gambling industry

5.3.1.1 Percentage of gaming related disputes/complaints investigated within time frames

100% (29 out of 29) of patron disputes investigated, decided upon and letters of notification issued within targeted timeframe

100% of patron disputes investigated within timeframe

100% (19 out of 19) of patron disputes investigated, decided upon and letters of notification issued within targeted timeframe




EXPENDITURE

(OVER)/UNDER


EXPENDITURE

(OVER)/UNDER

EXPENDITURE

R’000 R’000 R’000 R’000 R’000 R’000

Senior Manager 1 872 1 835 37 1 677 1 652 25

Monitoring & Gaming Audit 6 189 6 030 159 6 253 6 256 -3

Gaming Control 6 271 5 618 653 6 338 5 645 693

TOTAL 14 332 13 483 849 14 268 13 553 715



59

SUB-PROGRAMME 6.1: BETTING MONITORING AND CONTROL


Strategic Indicator






SO.6.1 Ensure completeness of betting taxes payable to the Provincial Revenue Fund

Number of monthly betting tax compliance reports


12 betting tax compliance reports compiled

12 betting tax compliance reports compiled and submitted to Chief Executive Officer


SO.6.2 Maintain regulatory and technical compliance in the betting industry

Number of annual betting regulatory compliance monitoring reports


Compile 1 Annual Regulatory Compliance Plan and 1 Annual Transformation Monitoring Plan

2 Annual plans compiled.

1 additional plan prepared

Additional monitoring plan for Transformation

S.O. 6.3 Protect the interest of the public within the betting industry

Percentage of outcomes determined in respect of lodged betting disputes / complaints


6.3.1 – 100% of betting related disputes / complaints lodged are investigated and outcomes determined

59% achieved

(20 out of 34 betting disputes/ complaints investigated and outcome determined)

Target not achieved. Negative variance of 41%

14 betting disputes / complaints still being investigated

Percentage of reported illegal activities handed over to SAPS for investigation


6.3.2 – 100% of reported illegal gambling activities handed over to SAPS for investigation

94% achieved

45 out of 48 reported illegal gambling activities handed over to SAPS for investigation.

Target not achieved. Negative variance of 6%

3 reported illegal gambling activities were not actionable

GRPAHS FOR BOOKMAKER: HORSES AND SPORT

BOOKMAKER - CONTINGENCY TAXES

TOTALISATOR - HORSE RACING TAXES

TOTALISATOR - SPORT TAXES

18 500 000 1 550 000

1 450 000

1 350 000

1 250 000

1 300 000

1 500 000

1 400 000

17 500 000

17 000 000

16 500 000

15 500 000

15 000 000

16 000 000

18 000 000

2 000,000

4 000,000

6 000,000

8 000,000

10 000,000

12 000,000

0,00

2017/2018 2017/2018 2017/20182018/2019 2018/2019 2018/2019



60Department:


SUB-PROGRAMME 6.1: BETTING MONITORING AND CONTROLPI No. Performance

IndicatorActual Achievement 2017/18





Strategic Objective 6.1: Ensure the completeness of betting taxes payable to the Provincial Revenue Fund6.1.1.1 Percentage of

monthly tax verification reports compiled on operational betting licensees

Monthly tax validations conducted on 100% of operational betting licensees (578 tax validations / 578 operational betting licensees)

Monthly tax verification reports compiled on 100% of operational betting licensees

100% achieved

549 out of 549 targeted monthly tax verification reports compiled on operational licensees


Strategic Objective 6.2: Maintain regulatory and technical compliance in the betting industry6.2.1.1 Number of

compliance inspection checklists in respect of betting inspections

100% of planed inspections conducted [320 on-site inspections and 6 FICA inspections] / 2 Additional unplanned on-site inspections conducted

256 Compliance inspections

250 compliance inspection checklists compiled out of 256 planned compliance inspections.

Negative variance of 6 compliance inspection checklists

6 compliance inspections were not conducted due to resources being allocated to assist with other operational areas

6.2.1.2 Percentage of betting related change requests/applications processed within prescribed timeframe

97% (70 out of 72 operational change requests processed within targeted timeframes)

100% of betting related change requests/applications processed within prescribed

86.84% achieved

66 out of 76 betting related change requests/applications were processed within targeted timeframe

Negative variance of 13.16%10 out of 76 betting related change requests/applications were processed outside of targeted timeframe

Some processes still manual and delays were experienced in processing.

6.2.1.3 Number of transformation monitoring reports in respect of betting licensees

9 annual monitoring inspections on corporate licensees conducted and 23 annual B-BBEE monitoring reports compiled on betting licensees.

20 Transformation monitoring reports in respect of betting licensees

20 Transformation Monitoring reports compiled


Strategic objective 6.3: Protect the Interests of the Public within the betting industry6.3.1.1 Percentage of

betting related disputes/complaints investigated within prescribed time frames

100% (14 out of 14) of lodged betting disputes investigated, heard and decided upon and letters of outcome issued within targeted timeframe

100% of betting related disputes/complaints investigated within prescribed time frames

28% achieved8 out of 29 disputes / complaints investigated within prescribed timeframe

Target not achieved, Negative variance of 72%3 out of 29 disputes / complaints investigated outside of prescribed timeframes18 out of 25 disputes/complaints are still under investigation

Negative variance caused by the following factors:-· Delays in facilitating dispute hearings· Delays in obtaining responses from licensees· Delays in notifying punters



61

SUB-PROGRAMME 6.1: BETTING MONITORING AND CONTROLPI No. Performance

IndicatorActual Achievement 2017/18





6.3.1.2 Number of illegal gambling inspection reports

38 Illegal gambling inspections conducted in conjunction with SAPS and other licensing authorities

20 illegal gambling inspection reports on raids conducted in conjunction with the SAPS

21 out of 21 signed illegal gambling inspection reports in respect of planned raids conducted in conjunction with the SAPS

Positive variance of 1 illegal gambling inspection report.

All reports of illegal gambling must be investigated by SAPS and the KZNGBB inspectors must accompany the SAPS when requested.


SUB-PROGRAMME NAME BUDGETACTUAL EXPENDITURE

(OVER)/UNDER EXPENDITURE BUDGET

ACTUAL EXPENDITURE

(OVER)/UNDER EXPENDITURE

R’000 R’000 R’000 R’000 R’000 R’000

Betting, Monitoring & Control 8 198 7 031 1 167 7 422 6 542 880

Illegal Gambling 1 286 1 155 131 1 134 1 117 17

TOTAL 9 484 8 186 1 298 8 556 7 659 897

REVENUE COLLECTION2018/2019 2017/2018

SUB-PROGRAMME NAME ESTIMATE

ACTUAL AMOUNT

COLLECTED

(OVER)/UNDER

COLLECTION ESTIMATE

ACTUAL AMOUNT

COLLECTED(OVER)/UNDER

COLLECTION

R’000 R’000 R’000 R’000 R’000 R’000

Fees Received 27 059 23 337 3 722 20 394 22 317 -1 923

Grants Received 42 104 42 310 -206 62 904 63 196 -292

Interest Received 4 776 7 152 -2 376 3 284 4 987 -1 703

Other Income 22 644 -622 20 2 18

Rollover/Retention 21 336 21 336 0 13 338 13 338 0

Gain on disposal of Assets 28 -28 3 -3

TOTAL 95 297 94 807 490 99 940 103 843 -3 903

Captial Investment2018/2019 2017/2018


EXPENDITURE

(OVER)/UNDER


EXPENDITURE(OVER)/UNDER EXPENDITURE

R’000 R’000 R’000 R’000 R’000 R’000

Computer Equipment 3 601 470 3 131 27 27 0

Office Equipment & Furniture 2 500 103 2 397 56 56 0

Software 228 -228 1 598 747 851

TOTAL 6 101 801 5 300 1 681 830 851


PART C: CORPORATE GOVERNANCE

62Department:


PART C

C O R P O R AT E G O V E R N A N C E



63

1. INTRODUCTION1.1 The Board provides strategic direction and ethical

leadership to the KwaZulu-Natal Gaming and Betting

Board (the Entity).

1.2 The Board of Directors is the accounting authority of the

Entity.

1.3 The Board is committed to the highest standards of

business integrity, ethical values and governance. It

recognises its responsibility to conduct its affairs with

prudence, transparency, accountability, honesty, fairness

and in a socially responsible manner, in compliance with

legislation, regulation and voluntary codes to ensure the

sustainability of the business.

1.4 Governance structures and processes are regularly

reviewed to align them with legislative and regulatory

changes and to reflect best practice.

1.5 In addition to the KwaZulu-Natal Gaming and Betting

Board legislation, the corporate governance principles

embodied in the Public Finance Management Act (PFMA)

apply to the entity and are complied with. In addition the

Board has committed to compliance with the principles

for good governance embodied in the Protocol for

Corporate Governance in the Public Sector (2003) as

amended.

1.6 The 31st of March 2019 marks the end of the first year in

office for the Board.

2. PORTFOLIO COMMITTEES2.1 Parliament exercises its role by evaluating the

performance of the entity, by interrogating its annual

financial statements and other relevant documents

which are tabled.

2.2 The Standing Committee on Public Accounts (SCOPA)

reviews the annual financial statements and the audit

reports of the external auditors.

2.3 The Portfolio Committee exercises oversight over the

service delivery performance and reviews the non-

financial information that is contained in the annual

reports of the entity. The Portfolio Committee is

concerned with service delivery and the enhancement of

economic growth.

2.4 During the financial year, four Finance Portfolio

Committee meetings and one Premier’s Portfolio

Committee meeting were held.

3. EXECUTIVE AUTHORITY (OFFICE OF THE PREMIER)

3.1 The PFMA governs and gives oversight authority to the

Executive Authority over the Board.

3.2 The Executive Authority also has power to appoint and

dismiss the Board. When appointing the Board, the

Executive Authority ensures that there is an appropriate

mix of Members with the necessary skills to guide the

entity.

3.3 On 3 May 2019, a Financial and Non-Financial Report was

presented to the Executive Authority, for the Quarter

4 period which is from 01 January 2019 to 31 March

2019. The report detailed revenue, expenditure, service

delivery information all required in terms of Regulation 3

to the KZN Gaming and Betting Act, as amended.



64Department:


4. THE BOARD GOVERNANCE STRUCTURES4.1 Board Composition:

4.1.1 The Board is a unitary structure with nine non-executive members and the CEO as an executive Board Member.

4.1.2 The MEC Responsible had appointed a Representative on the Board as he is empowered to do by Section 8 of the Act.

This role has been performed by Adv S. Chamane during the financial year.

4.1.3 Details of the Board Members are as follows:

Name Designation Date Appointed Area of Expertise Committee Membership

Dr S.G. Ngcobo Chairperson 11 April 2018 Governance, Business Development, Education

1. Attends All Board Meetings, also part of Social Ethics and Transformation for period under review

Mrs M.P. Myeni Deputy Chairperson

11 April 2018 Communications, ICT

1. Licencing, Registration, Monitoring, Control and Compliance Committee (Chairperson)

Mr S.N. Chetty Member 11 April 2018 Legal 1. Licencing, Registration, Monitoring, Control and Compliance Committee

2. Disciplinary and Dispute Hearings Committee (Chairperson)

Prof B.S. Stobie Member 11 April 2018 Finance 1. Audit Committee2. Finance Committee (Chairperson)

Ms Z.P. Tenza Member 11 April 2018 Legal 1. Human Resources and Remuneration Committee (Chairperson)

2. Licencing, Registration, Monitoring, Control and Compliance Committee

Mr L.S. Gabela Member 11 April 2018 Finance, Auditing, Public Administration

1. Licencing, Registration, Monitoring, Control and Compliance Committee

2. Finance Committee 3. Audit Committee (Chairperson

Mr S.S. Zondi Member 11 April 2018 Marketing, Public Administration

1. Social Ethics and Transformation Committee

Adv K.P. Thango Member 11 April 2018 Legal 1. Social Ethics and Transformation Committee (Chairperson)

2. Disciplinary and Dispute Hearings Committee

Dr T.I. Nzimakwe Member 11 April 2018 Public Administration

1. Finance Committee2. Human Resources and

Remuneration Committee

Ms P.N. Baloyi Chief Executive Officer

May 2015 Governance, Legal and Compliance

1. MANCO2. IT Steering Committee3. Attends all Board and Committee



65

4.1.4 The role of the non-executive Chairperson and the Chief

Executive Officer is formalised, separate and clearly

defined. The Chairman is responsible for leading the

Board, while the Chief Executive Officer is responsible

for the operational and financial management of the

entity. The division of responsibilities at the helm of the

entity ensures a balance of authority and power with no

single individual having unrestricted decision making

powers.

4.1.5 The non-executive Board Members have extensive

business experience and specialist skills across a

range of sectors including accounting, finance, law

and human resources. This enables them to provide

balanced, independent advice and judgment in the

decision making process.

4.1.6 The Board Members are free from any business

relationship that could interfere with their objectivity

or judgment in the implementation of the business

of the entity. Should a matter arise that has potential

conflict with a Board Member’s personal interest and

the Member’s obligation to act in the best interest of

the entity, such Member is required to declare such

conflict and recuse themselves from that part of the

meeting where such matter will be discussed

4.1.7 The Board Members provide effective leadership that is

based on an ethical foundation, which is characterised

by acting responsibly, accountably, honestly, with

integrity and transparency. This sets the tone from the

top, to promote an ethical culture within the Entity.

4.1.8 The Board meets at least eight times a year and

additional meetings can be convened to consider

specific business issues which may arise between

scheduled meetings. A number of additional meetings

and workshops were required during the year.

4.2 INDEPENDENCE OF BOARD MEMBERS

4.2.1 The KwaZulu-Natal Gaming and Betting Act

prescribes that Board Members are appointed for a

fixed term period of three years, only, although they

may be reappointed for a further term. Taking this

into account and that there are no factors which

are considered to prevent the Board Members from

exercising their independent judgment or acting in

an independent manner, all Members are considered

to be classified as independent in terms of the King IV

definition.

4.3 BOARD CHARTER

4.3.1 The scope of authority, responsibility, composition

and functioning of the Board is contained in a formal

charter which is regularly reviewed.

4.3.2 Board Members retain overall responsibility and

accountability for:

4.3.2.1 Approving strategic plans;

4.3.2.2 Monitoring operational performance and

management;

4.3.2.3 Ensuring effective risk management and internal

controls;

4.3.2.4 Legislative, regulatory and governance compliance;

4.3.2.5 Approval of significant accounting policies and

annual financial statements;

4.3.2.6 Monitoring transformation and empowerment;

4.3.2.7 Balanced and transparent reporting to stakeholders.

4.4 BOARD COMMITTEES4.4.1 The Board has delegated specific functions to

Committees, established in terms of Section 18 of

the Act, to assist the Board in meeting its oversight

responsibilities. All Board Committees are chaired by a

Board Member except for the Audit Committee which

is chaired by an external independent Member.

4.4.2 The Board does not abdicate its responsibilities to the

Committees, the ultimate responsibility still rests with

the Board.

4.4.3 All Committees have documented terms of reference

which are reviewed annually and the Head of

Governance, Risk and Compliance confirms that the

Committees have functioned in accordance with

these written terms of reference during the financial

year.



66Department:


Num

ber o

f m

eeti

ngs

held

Dr S

G N

gcob

o

Mrs

MP

Mye

ni

Mr S

N C

hett

y

Prof

BS

Stob

ie

Ms

ZP T

enza

Mr L

S G

abel

a

Mr S

S Zo

ndi

Adv

KP

Than

go

Dr T

I N

zim

akw

e

Mr V

. Ra

mph

al

(Ext

erna

l)

Ms V

. Ndl

ovu

(Ext

erna

l)

Board 8 8 8 4 6 7 8 7 6 5 - -

Special Board (&Strategy)

2 2 2 - 1 2 2 1 2 2 - -

Board Workshop 1 1 1 - 1 1 1 1 1 1 - -

Audit Committee 4 - - - 3 - 4 - - - 4 4

Dispute Hearing 3 - - 3 - 3 - - 2 - - -

SET Committee 3 2 1 - - - - 3 3 - - -

Finance Committee 5 - - - 5 - 5 - - 4 - -

Human Resources Committee

4 - - - 2 4 - - - 3 - -

Licensing, Committee

5 - 5 3 - 4 5 - - - - -

Public Hearings 4 - 4 2 - 4 4 - 1 - - -

Ad Hoc Meetings* - 7 4 1 2 4 3 3 2 4

Finance Portfolio - - - - - - - - - - - -

Premier’s Portfolio Committee

- 1 3 - 1 - 2 1 1 1 - -

Section 87 1 - - 1 - 1 - - 1 - - -

Section 41 - - - - - - - - - - - -

Stakeholder Engagement

9 6 3 - 2 4 5 5 3 5 - -

Total 49 27 30 14 22 34 39 19 22 26 4 4

* Ad Hoc includes HR Workshop, HR Moderation and Accommodation

4.6 REMUNERATION OF BOARD MEMBERS

4.5 BOARD AND COMMITTEE MEETING ATTENDANCE

Members’ fees Reimbursive expenses Total

Dr SG Ngcobo 366 827 20 124 386 951

Ms MP Myeni 449 736 20 504 470 240

Mr SN Chetty 313 974 5 646 319 620

Prof. BS Stobie 373 067 4 485 377 552

Ms ZP Tenza 407 601 8 133 415 734

Mr LS Gabela 437 166 41 056 478 222

Mr SS Zondi 256 440 624 257 064

Adv KP Thango 361 752 10 194 371 946

Dr TI Nzimakwe 252 799 10 095 262 894



67

to the Audit Committee. The Audit Committee

is responsible for ensuring that the entity has

implemented an effective policy and plan to

manage risk and that disclosures regarding risk are

comprehensive, timely and relevant.

5.3 The Head of Governance Risk and Compliance is

responsible for designing and implementing the

risk management process and monitoring ongoing

progress. With the assistance of a Risk Officer, she

regularly reviews the entity’s risk to ensure mitigation

strategies are being implemented by the business

units. Internal Auditors monitor the progress of the

entity and business units in managing risks and report

their findings to the Audit Committee quarterly.

5.4 Risk management is embedded in the entity’s annual

business planning cycle. In determining the strategic

and operational plans for the year ahead each

business unit is required to review its operational

risk register. This includes a review of the risks of

the previous financial year, considering new and

emerging risks and facilitated workshops with all

levels of management. A risk framework sets out the

various risks that should be considered as part of the

risk identification process. These potential risks are

updated annually to ensure all relevant issues are

considered.

5.5 Each risk on the register is assigned an impact

and probability rating. The impact assigned to a

risk is assessed and takes account of the financial,

compliance, reputation and people effects on the

entity. The probability of a risk materialising is also

measured. The impact and probability ratings are

then used to determine the inherent risk rating and

its significance to the entity.

5.6 Detailed risk mitigation plans are developed for each

risk, which then determines the level of residual risk.

Residual risk ratings are then assigned to each risk.

5.7 Quarterly reports are furnished to the Audit

Committee and to Board on the implementation of

the risk mitigation plans.

4.7 MANAGEMENT COMMITTEE

4.7.1 Executive management and the Board work closely

in determining the entity’s strategic objectives.

Authority has been delegated by the Board to the

Chief Executive Officer and Management Committee

for the implementation of the strategy and ongoing

management of the business.

4.7.2 The Management Committee comprises the Chief

Executive Officer, all Senior Manager and three

Unit Managers. The Board is apprised of progress

through reporting at board meetings and regular

communication with management.

4.7.3 The responsibilities of Management include:

· Developing and implementing the annual

performance plan and action plans;

· Preparing budgets and monitoring expenditure;

· Monitoring operational performance against

agreed targets;

· Adhering to financial management policies;

· Determining human resources policies and

practices;

· Monitoring and managing risk; and

· Communicating with stakeholders

4.8 BOARD SECRETARY

4.8.1 The Board Secretary ensures that board procedures,

all regulations and governance codes are observed

and also provides guidance to the Board Members

on governance, compliance and their fiduciary

responsibilities. Members have unrestricted access to

the advice and services of the Board Secretary.

4.8.2 The Board Secretary was appointed and assumed her

duties on the 01st of February 2018.

1.4.3 The Board is satisfied that the Board Secretary has the

necessary skills and expertise to fill the role.

5. RISK MANAGEMENT5.1 The KZNGBB follows a disciplined approach to

evaluating risks and developing appropriate

strategies to mitigate and manage risk. The risk

management methodology is considered by the

Audit Committee as well as the Set Committee

and any enhancements recommended during the

financial year have been adopted.

5.2 The Board is responsible for the oversight of risk

management and has delegated the responsibility



68Department:


6. THE AUDIT COMMITTEE6.1 ROLE

The Committee has an independent role with

accountability to both the Board and stakeholders.

The Committee’s responsibilities include the statutory

duties prescribed by the Public Finance Management

Act, the KZN Gaming and Betting Act and activities

recommended by King III as well as additional

responsibilities assigned by the Board.

6.2 FUNCTIONS

The Committee’s functions cover reporting, combined

assurance, internal audit, financial management,

performance management, risk management and

external audit and are outlined in detail in the Audit

Committee report on pages 79 of the audited financial

statements.

6.3 COMPOSITION

The Committee comprises 2 independent external

members who were appointed during 2016 and two

Board Members, one of whom is the Chairperson and

one who is the Chairperson of the Board’s Finance

Committee.

7. ACCOUNTABILITY AND COMPLIANCE7.1 INTERNAL AUDIT

The internal audit function provides information to

facilitate the establishment and maintenance of an

effective system of internal control to manage risks

associated with the entity’s business. The role of

internal audit is outlined in the terms of reference of

the Audit Committee and in the Internal Audit Charter.

Details of the internal audit function are contained

in the Audit Committee Report on pages 79 of the

audited financial statements.

7.2 INTERNAL CONTROL

Systems of internal control are designed to manage,

rather than eliminate, the risk of failure to achieve the

entity’s strategic objectives and to provide reasonable,

not absolute, assurance against misstatement or

loss. The Audit Committee considers the results of

formal documented reviews of systems of internal

controls and risk management including the design,

implementation and effectiveness of internal financial

controls. In addition the Audit Committee has oversight

of the entity’s performance against its strategic targets

and annual performance plan.

7.3 EXTERNAL AUDIT

The Board members ultimately accept responsibility

for the preparation of the audited annual financial

statements and performance reports that they fairly

represent the results of the entity in accordance with

the PFMA and GRAP Standards. The Auditor General

as “External Auditor” for the entity is responsible for

independently auditing and reporting on the financial

statements in conformance with GRAP Standards and

applicable laws as well as the performance of the

entity.

8. LEGISLATIVE AND REGULATORY COMPLIANCE

8.1 Legislative and regulatory compliance is monitored by

the Head; Governance, Risk and Compliance.

8.2 She is responsible for providing advice to the

operational business units, creating awareness and

developing an understanding of relevant legislation

and regulation.

8.3 Compliance with the KZN Gaming and Betting Act has

received primary attention during the financial year as

has compliance the PFMA, Treasury Regulations and

the Protection of Personal Information Act.

8.4 Five requests for information were received by the

KZNGBB in terms of the promotion of Access to

Information Act during the period. Where the entity

was in possession of the requested information, this

was provided.

8.5 Apart from the matters listed in the Audit Report under

the Governance and Compliance Section, there was no

other instances of major non-compliance.

9. ETHICS AND VALUES8.1 The KZNGBB subscribes to the highest ethical standards

of business conduct. A set of values and a Code of Conduct requires staff to display integrity, respect, openness, and affords them the right and obligation to challenge others who are not adhering to these values.

8.2 The KZN Gaming and Betting Act and Code of Conduct also sets stringent standards relating to the acceptance of gifts from third parties and declarations of potential conflicts of interest.

8.3 A fraud prevention policy ensures the entity’s firm stance against fraud and prosecution of offenders. This policy outlines the Board’s response to fraud, theft and corruption committed by staff and external parties against the entity. During the year fraud awareness has

been a priority for the GRC Unit.



69

10. WHISTLEBLOWERS LINE10.1 Staff are encouraged to report suspected fraudulent

or unethical behaviour via a toll-free telephone service

managed by an external service provider. All reported

incidents are investigated.

10.2 Awareness of this facility is created and staff members

are encouraged to report incidents before significant

losses are incurred.

11. SOCIAL RESPONSIBILITY11.1 It is the Board’s mandate to ensure that all gambling

authorised by it is conducted in a manner that promotes

the integrity of the gambling industry and does

not cause harm to the public interest. The KwaZulu-

Natal Gaming and Betting Board in accordance with

the entity’s legislated mandate, must ensure that

the interests of the public are maintained whilst

ensuring that the industry invests in socio-economic

development of communities. The entity maintains

a balance between job creation, socio-economic

development and revenue collection contributions by

this sector.

11.2 The KwaZulu-Natal Gaming and Betting industry’s

Corporate Social Responsibility Commitments are based

on license conditions and are aligned to education

and infrastructure programmes incorporating

community education, Health infrastructure and Social

Development, Community Development, Support

and Moral Regeneration Programmes, Agriculture,

Conservation and Environmental Programmes and

Arts, Culture, Sports and Recreation programmes. The

KZNGBB ensures compliance by the licensee in terms

of Corporate Social Responsibility commitments,

11.3 The Board takes this mandate seriously when granting

licences or registrations and in its monitoring function.

Licence conditions are imposed which take the

community’s, in which our licensees operate, best

interest into account. The Monitoring and Compliance

Business Units ensure adherence to these licence

conditions as well as initiatives of the South African

Responsible Gambling Foundation with whom the

KZNGBB has a close working relationship.

11.4 The Board has embarked on awareness campaigns

with the South African Responsible Gambling

Foundation (SARGF), the assessment of gambling

saturation levels and a social impact study. As part of

the Socio-Economic Impact study, there were focus

groups that were held in various communities within

the Province. These groups included the youth,

patrons at gambling establishments, senior citizen

groups as well as religious groups. The awareness

campaigns undertaken within the year under review

comprises of KZNGBB and SARGF school campaigns

as well as reporting illegal gambling incidents.

Community awareness programmes were held during

the year. The key activities that were undertaken

included Community Radio Talkshows on Responsible

Gambling assistance as well as the implications of

Illegal Gambling. In addition, Community awareness

programmes were undertaken in the Community of

Chatsworth.

11.5 Future initiatives include events that would be jointly

held with the National Gambling Board and the

Department of Trade and Industry which will create

awareness about the possible harms of gambling and

illegal gambling.

12. SOCIO-ECONOMIC DEVELOPMENT

12.1 A total amount of R 12 506 230.97 was contributed

to CSI initiatives by Gaming and Betting Licensees.

23.48% of contributions are made to Education

and 32.84% to Community Upliftment projects. A

breakdown of contributions in the various categories,

is reflected below:

CATEGORY OF CSI CASINOROUTE

OPERATOR BINGO BETTING TOTAL

Health and Welfare 464 183,60 684 249,00 110 000,00 1 650 239,26 2 908 671,86

Education 4 119 997,88 1 105 000,00 185 000,00 269 518,18 5 679 516,06

Community Upliftment Projects 545 174,57 575 000,00 266 057,12 330 852,73 1 717 084,42

Sports and Recreation 76 790,00 - - 1 190 712,68 1 267 502,68

Arts and Culture 100 000,00 30 000,00 185 000,00 38 620,00 353 620,00

Other Donations - - - 579 835,95 579 835,95

Total CSI Contributions 5 306 146,05 2 394 249,00 746 057,12 4 059 778,80 12 506 230,97



70Department:


Gaming and Betting licensees provide access to employment opportunities, thereby encouraging new entrants into the

industry within the Provincial economy. Additional jobs continue to be created through the growth in existing licensed

operations.

The table below reflects the comparative registered gambling employee statistics within the Province (registered by the Board

in terms of the Act).

As can be seen in the chart below, overall, there has been a growth in the number of registered gambling employees since

2014/15 – growth of 73 54%. This growth is as a result of increased gaming and betting licence operations.

EMPLOYMENT - REGISTERED GAMBLING INDUSTRY EMPLOYEES

COMPARATIVE CSI CREPORTED CONTRIBUTIONS - 2016/17 TO 2019/20 (AS AT JUNE 2019)

REGISTERED EMPLOYEES -EMPLOYMENT/JOBCREATION WITHIN THE GAMBLING INDUSTRY IN KZN

7000

6000

5000

4000

3000

2000

1000

0

7000

6000

5000

4000

3000

2000

1000

02014/15

3745

2015/16

4745

2016/17

4894

2017/18

5921

2018/19

6499

Casino LPM (Route Operators) Bingo Bookmakers & Totalisators Total

2014/15 2167 97 311 1170 3745

2015/16 2643 104 323 1675 4745

2016/17 2638 103 194 1959 4894

2017/18 2497 98 294 3032 5921

2018/19 2481 97 438 3483 6499

Health and Welfare 4%

Education 39%

Community Upliftment Projects 5%

Sports and Recreation 50%

Arts and Culture 1%

Other Donations 1%



71

SMME Spend by Gaming Licensees: The graphs below depicts the SMME spend by Gaming licensees in the period under

review.

REPORTED CORPORATE SOCIAL INVESTMENT CONTRIBUTIONS


10000000

8000000

6000000

4000000

2000000

0

2018/19

R 976 642 502

R2 56 695 041

R 801 536 734

2017/18

R 338 510 728

R 185 649 549

R 648 319 777

2016/17

R 820 003 969

R 2 222 966 191

R 846 796 059

2015/16

R805 487 931

R 256 556 656

R 859 682 129

2014/15

R 954 038 093

R 1 146 736 100

R 568 544 589

The chart below reflects the contributions made to CSI by the gaming and betting licences for the period 2015/16 to 2017/18.

R12 000 000,00

R10 000 000,00

R8 000 000,00

R6 000 000,00

R4 000 000,00

R2 000 000,00

R0,00

Local Economy

SMME

PDI Business

2018/19 2017/18 2016/2017 2015/2016R5 306 146,05 R2 633 855,75 R7 171 903,76 R9 580 422,33 R2 394 249,00 R1 577 928,28 R2 755 251,40 R1 344 259,94 R746 057,12 R902 673,09 R568 987,39 R16 640,54

R4 059 778,80 R6 024 362,34 R9 253 478,76 R3 088 540,60

CasinoLPMsBingoBookmakers & Totalisators



72Department:


SMME Spend by Betting Licensees: The graphs below depicts the SMME spend by Betting licensees in the period under review.

REPORTED SMME SPEND BY BETTING LICENSEES - 2016/17 TO 2018/19

R600000 00.00

R500000 00.00

R400000 00.00

R300000 00.00

R200000 00.00

R100000 00.00

R 0.00

Local Economy

SMME

PDI Business

2018/19

R 509 200 348

R 233 774 525

R 150 389 164

2017/18

R 297 746 502

R 281 732 347

R 131 535 222

2016/2017

R 195 676 276

R 75 617 229

R 85 722 972



73

13. GALLERY OF ACTIVITIES AND PROGRAMMES UNDERTAKEN IN THE YEAR UNDER REVIEW

Socio Economic Impact Study Focus Groups at licensee

establishment in KwaDukuza

Socio Economic Impact Study Focus Groups at Umkomaas Bible Fellowship Church

.JPG

Socio Economic Impact Focus Group Sessions Held at Senior Citizens Group Phoenix

Socio Economic Impact Study Focus Groups at Emmanuel

Ministries in Asherville



74Department:


Joint SARGF and KZNGBB Leadership Development Programme Excursion held at Paradise Valley

Social Worker Training undertaken by SARGF and KZNGBB at DAFTA Chatsworth

Social Worker Training at Chatsworth Child Welfare with SARGF and KZNGBB



75

Stakeholder Engagement with KZNGBB and Suncoast Casino.

KZNGBB supports the Dundee July Rural Horseriding Festival



Stakeholder Engagement between Gold Circle and KZNGBB



76Department:


Kingdom Slots Donates to Uthombo Foundation

Joint SARGF and KZNGBB info sharing sessions with senior citizens DAFTA

Adv KP Thango, Mr S Charles, Mr V Ramdas and Ms P Baloyi at

SUNCOAST Expansion Launch Event



77

Schools Awareness Programme: Shallcross

Parliament Portfolio Committee visit to Great

Bingo in Ladysmith

Parliament Portfolio Committee visits undertaken at

Gold Rush Bingo

Joint School Awareness Programme - Umlazi

Joint School Awareness Programme by SARGF and KZNGBB -

Fairvale Secondary School Wentworth



78Department:


November Month Joint Awareness at Gold Rush

Bingo Chatsworth

November Month Joint Awareness Campaigns at Hollywood

Bets Stanger

November Month Joint Activations Awareness Programme conducted by KZNGBB and SARGF

November Month Joint Awareness Campaign conducted by KZNGBB and

SARGF at Suncoast Casino



79

14. AUDIT AND RISK COMMITTEE REPORT

The Committee oversees the appointment, contract and remuneration of the Internal Audit function and that it is suitably capable with access to the Audit Committee Chair and reports to the Committee on internal audit duties and other matters designated to the function. The Audit Committee monitors that the Internal audit function follows a risk based plan, reviews the risk profile regularly and adapts the plan accordingly.

Based on the various reports by Internal Audit, the Audit Report on the Annual Financial Statements and the management report of the Auditor-General, the Committee noted that some matters were reported indicating deficiencies in the systems of internal control. We also noted that management has implemented adequate controls in most areas within the organisation to provide reasonable assurance that all major inherent risks are appropriately identified; managed and applicable legislation is adhered to.

Accordingly, we can report that the system of internal control over the financial reporting period under review was efficient and effective but has room for improvement.

Evaluation of Financial Statements: We have:· Reviewed and discussed the audited annual financial

statements to be included in the annual report, with the Auditor-General South Africa and the Chief Executive Officer (Accounting Officer);

· Reviewed the Auditor-General South Africa’s management letter and management’s response thereto;

· Reviewed changes in accounting policies and practices;· Reviewed the entity’s compliance with legal and

regulatory provisions; and· Reviewed significant adjustments made as a result of the

audit.

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 be accepted and read together with the report of the Auditor-General South Africa.

Mr L.S. Gabela Chairperson of the Audit Committee: KwaZulu-Natal Gaming and Betting Board

31 July 2019

AUDIT AND RISK COMMITTEE REPORT

Report of the Audit Committee: We are pleased to present our report for the financial year ended 31 March 2019

Audit Committee Members and Attendance: During the 2018/19 financial year the Audit Committee consisted of the four members who are listed hereunder. The Committee must meet at least four (4) times per annum as per its approved terms of reference, the Audit Committee Charter. During the reporting period five meetings were held and attendance was as tabled below:

Name of Member Number of Meetings Attended

Mr L.S. Gabela 5

Prof B.S. Stobie 5

Mr V. Ramphal 5 Mrs V. Ndlovu 5

Audit Committee Responsibility: We report that we have adopted appropriate formal terms of reference in our Charter in line with the requirements of Section 51 (1) (a) (ii) of the Public Finance Management Act and Treasury Regulation 27.1. We report further that we have conducted our affairs in compliance with this Charter.

Internal Audit: We are satisfied that during the reporting period the internal audit function operated effectively and that it addressed the risks pertinent to the entity in its audits. The internal audit function was outsourced for the 2018/19 period. The internal audit function was outsourced for the 2018/19 period and the service provider undertook all audits per the annual audit plan approved by the Audit Committee.

As a Committee we met with the Internal Audit during the year to ensure that the function was executed effectively and objectively.

We are satisfied with the content and quality of the quarterly reports prepared and issued by the internal auditors of the entity during the year under review.

The quality of in year management quarterly reports submitted in terms of the PFMA: We reviewed the in year management quarterly reports submitted and were satisfied with the content and quality of reports prepared and submitted by management during the year.

The Effectiveness of Internal Control: In line with the PFMA, Treasury Regulations and the King IV Report on Corporate Governance for South Africa 2016 (effective date 01 April 2017) requirements, Internal Audit provides the Audit Committee and management with the assurance that the internal control is appropriate and effective. The Committee ensures that there is a Chief Audit Executive and Internal Audit function which is independent of management.


PART D: HUMAN RESOURCES MANAGEMENT

80Department:


PART D

HUMAN RESOURCESMANAGEMENT



81

1. INTRODUCTIONThe KZNGBB strives to be an employer of choice, and the HRM Strategy was drafted with this particular aim.

The Strategic objective for Human Resources is to attract, develop and retain suitable, qualified and competent human

resources for the Board. The overall purpose of HR is to ensure that all matters relating to human capital management and

development are implemented effectively and efficiently

The Human Resources Unit provides services such as Training and Development, Recruitment and Selection, Labour Relations,

Performance Management and Development Employee Wellness and Human Resource Administration. The Unit set a number

of priorities for the year under review, which included the following:

• The Workplace Skills Plan and Annual Training Report submitted to the relevant SETA

• Employment Equity plan developed and approved.

• Human Resource Strategy developed and approved.

• Human Resources policies reviewed.

• Job Descriptions reviewed.

• Employee Wellness Program implemented.

• Succession Planning not achieved and this has been carried over to the 2018/19 FY

• Employment Equity Plan for the entity submitted timeously.

• Performance Reward System not yet fully developed and implemented

• Skills audit commenced.

Some of the targets were not achieved due to prolonged recruitment processes. The unit is still facing a challenge with:

• The lack of a performance reward system.

2. HUMAN RESOURCES OVERSIGHT STATISTICS2.1. PERSONNEL COSTS BY SALARY BAND

Level Personnel Expenditure

% of personnel exp. To total personnel

cost

No of employees* Average personnel cost per employee

Top Management 1 909 893.15 4.04% 1 1 909 893.15

Senior Management 7 225 118.34 15.28% 6 1 204 186.39

Professional qualified 9 201 893.31 19.46% 11 836 535.76

Skilled 25 370 993.10 53.66% 49 517 775.37

Semi – Skilled 3 319 639.39 7.02% 12 276 636.62

Unskilled 250 430.56 0.53% 2 125 215.28

TOTAL 47 277 967.85 100.00% 81 583 678.62

* - the number of employees includes those who resigned during the year

2.2. PERFORMANCE REWARDS

Level Performance rewards Personnel Expenditure % of performance rewards to total

personnel cost

Top Management 0 1 909 893.15 0

Senior Management 0 7 225 118.34 0

Professional qualified 32 960.38 9 201 893.31 0.07%

Skilled 0 25 370 993.10 0

Semi – Skilled 0 3 319 639.39 0

Unskilled 0 250 430.56 0

TOTAL 32 960.38 47 277 967.85 0.07%



82Department:


2.3. TRAINING COSTS

Programme / Activity / Objective

Personnel Expenditure

Training Expenditure

Training Expenditure as % of Personnel

Cost

No. of Employees

trained

Avg training cost per

employee

KZNGBB 47 277 967.85 381 768.00 0.78% 79 4 832.50

2.4. EMPLOYMENT AND VACANCIES

Programme/activity/objective 2017/18 No. of employees

2018/19 Approved

posts

2018/19 No. of employees

2018/19 vacancies

% of vacancies

Office of the CEO 3 4 3 1 1.15

Licensing & Registration 10 13 13 - -

Gaming Monitoring & Compliance 17 22 20 2 2.30

Betting Monitoring & Control and Law enforcement

13 14 11 3 3.45

Finance 9 11 10 1 1.15

Human Resources 5 9 9* 2 2.30

ICT 4 6 4 2 2.30

Legal Services 3 3 3 - -

Governance Risk and Compliance 5 5 5 - -

TOTAL 69 87 78 11 12.64

* includes two positions not on the approved structure.

Employment Level 2017/18 No. of employees

2018/19 Approved

Posts

2018/19

No. of employees

2018/19 vacancies

% of Vacancies

Top Management 1 1 1 - -

Senior Management 6 7 6 1 1.15

Professional qualified 10 11 11 - -

Skilled 42 56 46 10 11.49

Semi-skilled 9 11 12* -* -

Unskilled 1 1 2* -* -

TOTAL 69 87 78 11 12.64

* includes two positions not on the approved structure.

2.5. EMPLOYMENT CHANGES

Industry Norm KZNGBB 2017/18 FY KZNGBB 2018/19 FY

7.5% per annum 10% (8) 3.44% (3)

The above table indicates that our labour turnover has decreased from the previous financial year.

Salary Band Employment at beginning of period

Appointments Terminations Employment at end of period

Top Management 1 - - 1

Senior Management 6 - - 6

Professional qualified 10 1 - 11

Skilled 42 7 3 46

Semi – Skilled 9 3 - 12

Unskilled 1 1 - 2

TOTAL 69 12 3 78



83

During the 2018/19 financial year, the following key vacant positions were filled by the entity:

• Manager – Human Resources (May 2018)

• Compliance Officer (June 2018)

• Procurement Officer (June 2018)

• Inspector – Gaming Systems Engineer (August 2018)

• Receptionist – 2 posts (September 2018)

• General Assistant (September 2018)

• Executive Assistant: CEO (September 2018)

• Compliance Officer – 2 posts (December 2018)

• Licensing & Registration Officer (January 2019)

• Licensing & Registration Officer (February 2019)

Reasons for staff leaving

Reason Number % of total no. of staff leaving

Resignation 3 100%

Total 3 100%

There were three resignations during the financial year. Of the three, two employees resigned to pursue business opportunities

while the third resigned due to a better opportunity (salary, benefits and higher level position). The entity experienced delays

in the filling of positions due to the austerity measures implemented by the Provincial Government. This resulted in a longer

recruitment process as approval must first be sought prior to the position being advertised.

2.6. LABOUR RELATIONS: MISCONDUCT AND DISCIPLINARY ACTION

Nature of disciplinary action Number

Verbal warning -

Written warning 2

Final written warning 1

Dismissal -

Total 3

2.7. EQUITY TARGETS AND EMPLOYMENT EQUITY STATUS

The Employment Equity Plan for the entity has been developed and approved.

Levels MALESAfrican Coloured Indian White

Current Target Current Target Current Target Current targetTop Management - N/A - N/A - N/A - N/A

Senior Management 2 1 - N\A 1 N\A 2 N\A

Professional qualified 7 N/A - N/A 1 N/A - N/A

Skilled 20 N\A - N\A 3 N\A - N\A

Semi-skilled 3 N/A - N/A - N/A - N/A

Unskilled - N\A - N\A - N\A - N\A

TOTAL 32 N/A - N/A 5 N/A 2 N/A

Levels FEMALESAfrican Coloured Indian WhiteCurrent Target Current Target Current Target Current target

Top Management 1 N/A - N/A - N/A - N/A

Senior Management - 3 - N\A - N\A 1 N\A

Professional qualified 2 N/A - N/A 1 N/A - N/A

Skilled 15 N/A 1 N\A 5 N\A 2 N\A

Semi-skilled 5 N/A 1 N/A 2 N/A 1 N/A

Unskilled 2 N\A - N\A - N\A - N\A

TOTAL 25 3 2 N/A 8 N/A 4 N/A



84Department:


DURBAN KZNGBB STAFF

PIETERMARITZBURG KZNGBB STAFF



85


PART E: FINANCIAL STATEMENTS

86Department:


The reports and statements set out below comprise the

consolidated annual financial statements presented to the

provincial legislature:

Accounting Authority’s Responsibilities and Approval 87

Report of the Auditor General 88

Annexure- Auditor-General’s responsibility

for the Audit 91

Accounting Authority’s Report 92

Statement of Financial Position 94

Statement of Financial Performance 95

Statement of Changes in Net Assets 96

Cash Flow Statement 97

Statement of Comparison of Budget and Actual Amounts 98

Accounting Policies 99

Notes to the Consolidated Annual Financial Statements 109

PART E

F I N A N C I A L S TAT E M E N T S

CONTENTS



87

ACCOUNTING AUTHORITY’S RESPONSIBILITIES AND APPROVALThe members are required by the Public Finance and Management Act, (Act 1 of 1999), to maintain adequate accounting

records and are responsible for the content and integrity of the consolidated annual financial statements and related financial

information included in this report. It is the responsibility of the members to ensure that the consolidated annual financial

statements fairly present the state of affairs of the entity as at the end of the financial year and the results of its operations

and cash flows for the period then ended. The external auditors are engaged to express an independent opinion on the

consolidated annual financial statements and was given unrestricted access to all financial records and related data.

The consolidated annual financial statements have been prepared in accordance with Standards of Generally Recognised

Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board.

The consolidated annual financial statements are based upon appropriate accounting policies consistently applied and

supported by reasonable and prudent judgements and estimates.

The members acknowledge that they are ultimately responsible for the system of internal financial control established by

the entity and place considerable importance on maintaining a strong control environment. To enable the members to meet

these responsibilities, the accounting authority sets standards for internal control aimed at reducing the risk of error or deficit

in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework,

effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk.

These controls are monitored throughout the entity and all employees are required to maintain the highest ethical standards

in ensuring the entity’s business is conducted in a manner that in all reasonable circumstances is above reproach. The

focus of risk management in the entity is on identifying, assessing, managing and monitoring all known forms of risk across

the entity. While operating risk cannot be fully eliminated, the entity endeavours to minimise it by ensuring that appropriate

infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and

constraints.

The members are of the opinion, based on the information and explanations given by management, that the system of internal

control provides reasonable assurance that the financial records may be relied on for the preparation of the consolidated

annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute,

assurance against material misstatement or deficit.

The members have reviewed the entity’s cash flow forecast for the year to 31 March 2020 and, in the light of this review and the

current financial position, they are satisfied that the entity has or has access to adequate resources to continue in operational

existence for the foreseeable future.

The annual financial statements are prepared on the basis that the entity is a going concern and that the Provincial

Government has neither the intention nor the need to liquidate or curtail materially the scale of the entity.

Although the accounting authority are primarily responsible for the financial affairs of the entity, they are supported by the

entity’s external auditors.

The external auditors are responsible for providing reasonable assurance on the entity’s consolidated annual financial

statements. The consolidated annual financial statements have been examined by the entity’s external auditors and their

report is presented on page 88.

The consolidated annual financial statements set out on pages 92 to 135, which have been prepared on the going concern

basis, were approved by the accounting authority on 29 May 2019 and were signed on its behalf by:

Dr SG Ngcobo

Chairperson



88Department:


REPORT OF THE AUDITOR-GENERAL TO PROVINCIAL LEGISLATURE ON KWAZULU-NATAL GAMING AND BETTING BOARDREPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

Opinion

1. I have audited the consolidated and separate financial statements of the KwaZulu-Natal Gaming and Betting Board (KZN

Gaming and Betting Board) set out on pages 92 to 135, which comprise the consolidated and separate statement of

financial position as at 31 March 2019, the consolidated and separate statement of financial performance, statement of

changes in net assets and the statement of cash flows, as well as the notes to the consolidated and separate financial

statements, including a summary of significant accounting policies.

2. In my opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated

and separate financial position of the KZN Gaming and Betting Board as at 31 March 2019, and their financial perfonnance

and cash flows for the year then ended in accordance with the South African Standards of Generally Recognised Accounting

Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No.

1 of 1999) (PFMA).

Basis for opinion

3. I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those

standards are further described in the auditor-general’s responsibilities for the audit of the consolidated and separate

financial statements section of this auditor’s report.

4. I am independent of the entity in accordance with sections 290 and 291 of the International Ethics Standards Board for

Accountants’ Code of Ethics for Professional Accountants (IESBA code}, parts 1 and 3 of the International Ethics Standards

Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence

Standards) and the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical

responsibilities in accordance with these requirements and the IESBA codes.

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

Responsibilities of accounting authority for the financial statements

6. The board, which constitutes the accounting authority is responsible for the preparation and fair presentation of the

consolidated and separate financial statements in accordance with SA Standards of GRAP and the requirements of the

PFMA, and for such internal control as the accounting authority determines is necessary to enable the preparation of

consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

7. In preparing the consolidated and separate financial statements, the accounting authority is responsible for assessing its

entity’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the

going concern basis of accounting unless the appropriate governance structure either intends to liquidate the entity or to

cease operations, or has no realistic alternative but to do so.

Auditor-general’s responsibilities for the audit of the consolidated and separate financial statements

8. My objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a

whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my

opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance

with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and

are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of these consolidated and separate financial statements.



89

9. A further description of my responsibilities for the audit of the consolidated and separate financial statements is included in

the annexure to this auditor’s report. I Report on the audit of the annual performance report

10. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued

in terms thereof, I have a responsibility to report material findings on the reported performance information against

predetermined objectives for selected programmes presented in the annual performance report. I performed procedures

to identify findings but not to gather evidence to express assurance.

11. My procedures address the reported performance information, which must be based on the approved performance

planning documents of the entity. I have not evaluated the completeness and appropriateness of the performance

indicators included in the planning documents. My procedures also did not extend to any disclosures or assertions

relating to planned performance strategies and information in respect of future periods that may be included as part of

the reported performance information. Accordingly, my findings do not extend to these matters.

12. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed

from the performance management and reporting framework, as defined in the general notice, for the following selected

programmes presented in the annual performance report of the entity for the year ended 31 March 2019:

Programmes Pages in the annual performance repoRT

Programme 4 - Licensing and Registration 48-51

Programme 6 - Betting, Monitoring and Control 58-61

13. I performed procedures to determine whether the reported performance information was properly presented and whether

performance was consistent with the approved performance planning documents. I performed further procedures to

determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the

reported performance information to determine whether it was valid, accurate and complete.

14. I did not raise any material findings on the usefulness and reliability of the programmes tabulated in paragraph 12 above.

Other matters

15. I draw attention to the matters below.

Achievement of planned targets

16. Refer to the annual performance report on pages 23 to 61 for information on the achievement of planned targets for the

year and explanations provided for the under/over achievement of a number of targets.

Adjustment of material misstatements

17. I identified material misstatements in the annual performance report submitted for auditing. These material misstatements

were on the reported performance information of the licensing and registration and betting, monitoring and control

programmes. As management subsequently corrected the misstatements, I did not raise any material findings on the

usefulness and reliability of the reported performance information.

Report on the audit of compliance with legislation

Introduction and scope

18. In accordance with the PAA and the general notice issued in terms thereof, I have a responsibility to report material findings

on the compliance of the entity with specific matters in key legislation. I performed procedures to identify findings but not

to gather evidence to express assurance.

19. The material findings on ·compliance with specific matters in key legislation are as follows:

Expenditure management

20. Effective and appropriate steps were not taken to prevent irregular expenditure of R331 255 disclosed in note 28 to the

REPORT OF THE AUDITOR-GENERAL TO PROVINCIAL LEGISLATURE ON KWAZULU-NATAL GAMING AND

BETTING BOARD (CONTINUED)



90Department:


annual financial statements, as required by section 51(1)(b)(ii) of the PFMA. The majority of the irregular expenditure was

caused by the use of expired contracts.

Consequence management

21 . I was unable to obtain sufficient appropriate audit evidence that disciplinary steps were taken against officials who had

incurred irregular expenditure as required by section 51(1)(e)(iii) of the PFMA. This was due to proper and complete records

that were not maintained as evidence to support the inquiry or investigations into irregular expenditure.

Other information

22. The accounting authority is responsible for the other information. The other information comprises the information

included in the annual report. The other information does not Include the consolidated and separate financial statements,

the auditor’s report and those selected programmes presented in the annual performance report that have been specifically

reported in this auditor’s report.

23. My opinion on the financial statements and findings on the reported performance information and compliance with

legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion

thereon.

24. In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other

information is materially inconsistent with the consolidated and separate financial statements and the selected programmes

presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially

misstated.

25. The other information I obtained prior to the date of this auditor’s report is annual report which was not fully completed,

and various schedules or reports to be included in the annual report were still being updated or outstanding, and are expected

to be made available after 31 July 2019.

26. If, based on the work I have performed on the other information that I obtained prior to the date of this auditor’s report,

I conclude that there is a material misstatement of this other information, I am required to report that fact. I am unable to

conclude whether the annual report information is materially misstated because information was still being updated.

27. When I do receive and read the updated annual report, if I conclude that there is a material misstatement therein, I am

required to communicate the matter to those charged with governance and request that the other information be corrected.

If the other information is not corrected, I may have to retract this auditor’s report and re-issue an amended report as

appropriate. However, if it is corrected this will not be necessary.

lnternal control deficiencies

28. I considered internal control relevant to my audit of the consolidated and separate financial statements, reported

performance information and compliance with applicable legislation; however, my objective was not to express any form

of assurance on it. The matters reported below are limited to the significant Internal control deficiencies that resulted in the

findings on compliance with legislation included in this report.

29. Management did not exercise effective oversight and monitoring over the implementation of the necessary compliance

related controls.

Pietermaritzburg

31 July 2019

REPORT OF THE AUDITOR-GENERAL TO PROVINCIAL LEGISLATURE ON KWAZULU-NATAL GAMING AND

BETTING BOARD (CONTINUED)



91

ANNEXURE- AUDITOR-GENERAL’S RESPONSIBILITY FOR THE AUDIT

1. As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain professional scepticism

throughout my audit of the consolidated and separate financial statements, and the procedures performed on reported

performance information for selected programmes and on the entity’s compliance with respect to the selected subject

matters.

FINANCIAL STATEMENTS

2. In addition to my responsibility for the audit of the consolidated and separate financial statements as described in this

auditor’s report, I also:

• I dentify and assess the risks of material misstatement of the consolidated and separate financial statements whether

due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is

sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting

from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal control

• obtain an understanding of internal control relevant to the audit 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 • evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by the accounting authority

• conclude on the appropriateness of the accounting authority’s use of the going concern basis of accounting in the

preparation of the consolidated and separate financial statements. I also conclude, based on the audit evidence

obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the

KZN Gaming and Betting Board’ ability to continue as a going concern. If I conclude that a material uncertainty exists,

I am required to draw attention in my auditor’s report to the related disclosures in the consolidated and separate

financial statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the

financial statements. My conclusions are based on the information available to me at the date of this auditor’s report.

However, future events or conditions may cause the entity to cease continuing as a going concern

• evaluate the overall presentation, structure and content of the consolidated and separate financial statements,

including the disclosures, and whether the consolidated and separate financial statements represent the underlying

transactions and events in a manner that achieves fair presentation

• obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities

within the group to express an opinion on the consolidated and separate financial statements. I am responsible

for the direction, supervision and performance of the group audit. I remain solely responsible for my audit opinion

Communication with those charged with governance

3. I communicate with the accounting authority regarding, among other matters, the planned scope and timing of the audit

and significant audit findings, including any significant deficiencies in internal control that I identify during my audit

I also confirm to the accounting authority that I have complied with relevant ethical requirements regarding independence,

and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence

and, where applicable, related safeguards.



92Department:


ACCOUNTING AUTHORITY’S REPORT

The members submit their report for the year ended 31 March 2019.

1. ESTABLISHMENTThe entity was established on 01 April 2011 in terms of Section 5 of the KwaZulu-Natal Gaming and Betting Act, Act 8 of 2010, as amended.

2. REVIEW OF ACTIVITIESMain business and operationsIn terms of Section 6 of the Act, the objects of the Board are to:

(a) Ensure that all gambling authorised under this Act is conducted in a manner which promotes the integrity of the gambling industry and does not cause harm to the public interest;

(b) Ensure that all gaming authorised under this Act promotes the Province’s objectives for developing a gaming industry which objectives are the promotion of tourism, employment and economic and social development in the Province;

(c) Promote opportunities for persons contemplated in the definition of “broad-based black economic empowerment”, as contained in the Broad-Based Black Economic Empowerment Act, 2003 (Act No.53 of 2003), to participate in the gambling industry of the Province in the capacity of licensees or registrants under this Act ;

(d) Increase the ownership stakes of persons contemplated in the definition of “broad-based black economic empowerment”, as contained in the Broad-Based Black Economic Empowerment Act, 2003 (Act No.53 of 2003), in the gambling industry of the Province;

(e) Develop appreciation for and knowledge of horse racing amongst all communities, particularly those comprised of historically disadvantaged persons; and

(f ) Limit restrictive practices, the abuse of dominant market position and mergers in the betting industry, as contemplated in the Competition Act, 1998 (Act No. 89 of 1998), and the Board is, for the purposes of the said Act, a regulatory authority as defined in section 1 of that Act.

The operating results and state of affairs of the entity are fully set out in the attached financial statements and do not in our opinion require any further comment.

Net deficit of the entity was R 6 488 915 (2018: surplus R 23 850 950). The deficit was due to the entity utilising previous surpluses to fund operations. The unusually high surplus for the previous year was as a result of Provincial Treasury returning an amount of R20 033 000 which is to be utilised for the specific purpose of office accommodation for the entity.

The term of office for the previous Board of Members ended on 31 March 2018 and the new Board of Members were appointed with effect from 11 April 2018 and sworn in by the Honourable Premier, Mr TW Mchunu, on 20 April 2018. The Chief Executive Officer filled the role of the Accounting Authority (in terms of the PFMA) during the period of there being no Board of members. Paragraph 6 below lists the details of the Board of Members.

3. GOING CONCERNWe draw attention to the fact that at 31 March 2019, the entity had an accumulated surplus (deficit) of R 62 566 166 and that the entity’s total assets exceed its liabilities by R 62 566 166.

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

4. SUBSEQUENT EVENTSThe members are not aware of any matter or circumstance arising since the end of the financial year which would warrant any changes to the financial statements or further disclosures to be made.

The reporting line for the entity changed after year end. With effect from 01 April 2019, the reporting structure was amended

from the Office of the Premier to the Department of Economic Development, Tourism and Environmental Affairs.



93

5. ACCOUNTING POLICIES

The consolidated annual financial statements have been prepared in accordance with the prescribed Standards of Generally

Recognised Accounting Practices (GRAP) issued by the Accounting Standards Board as the prescribed framework by National

Treasury.

6. ACCOUNTING AUTHORITY

The term of office of the previous Members expired on 31 March 2018 and the new Board of Members were appointed with

effect from 11 April 2018 and were sworn in by the Honourable Premier, Mr TW Mchunu, on 20 April 2018.

The members of the entity during the year and to the date of this report are reflected below:

Name Nationality

Dr SG Ngcobo South African Appointed 11 April 2018

Ms MP Myeni South African Appointed 11 April 2018

Adv KP Thango South African Appointed 11 April 2018

Ms ZP Tenza South African Appointed 11 April 2018

Mr LS Gabela South African Appointed 11 April 2018

Mr SS Zondi South African Appointed 11 April 2018

Dr TI Nzimakwe South African Appointed 11 April 2018

Prof. BS Stobie South African Appointed 11 April 2018

Mr SN Chetty South African Appointed 11 April 2018

7. CHIEF EXECUTIVE OFFICER

The Chief Executive Officer of the entity is Ms PN Baloyi.

8. BOARD SECRETARY

The Board secretary of the entity is Mrs SH Meyiwa of:

Business addressKZNGBB House

Redlands Office Estate

1 George MacFarlane Drive

Pietermaritzburg

3201

Postal address Private Bag X9102

Pietermaritzburg

3200

9. AUDITORS

The Auditor-General South Africa will continue in office for the next financial period.

ACCOUNTING AUTHORITY’S REPORT (CONTINUED)



94Department:


STATEMENT OF FINANCIAL POSITIONAS AT 31 MARCH 2019

2019 2018

* Restated

Notes R R

Assets

Current Assets

Trade and other receivables 2 3 397 892 2 150 723

Cash and cash equivalents 3 93 455 761 93 511 146

96 853 653 95 661 869

Non-Current Assets

Movable assets 4 2 046 259 2 299 188

Intangible assets 5 2 382 905 3 877 232

4 429 164 6 176 420

Total Assets 101 282 817 101 838 289

Liabilities

Current Liabilities

Operating lease liability 6 498 395 114 557

Payables from exchange transactions 7 36 809 618 32 415 198

Taxes and transfers payable (non-exchange) 8 1 111 539 112 914

Cash and cash equivalents (credit card) 3 297 099 140 539

38 716 651 32 783 208

Total Liabilities 38 716 651 32 783 208

Net Assets 62 566 166 69 055 081

Accumulated surplus 9 62 566 166 69 055 081

* See Note 24



95

STATEMENT OF FINANCIAL PERFORMANCEFOR THE YEAR ENDED 31 MARCH 2019

2019 2018

* Restated

Notes R R

Revenue

Revenue from exchange transactions

Rendering of services 10 23 336 615 22 437 270

Interest income 11 7 152 030 4 915 259

Sundry income 2 956 2 156

Recoveries 10 570 637 -

Interest received - investment 72 826 72 142

Gain on disposal of movable assets 28 265 2 733

Total revenue from exchange transactions 31 163 329 27 429 560

Revenue from non-exchange transactions

Transfer revenue

Government grants & subsidies 42 309 919 63 196 000

Total revenue 10 73 473 248 90 625 560

Expenditure

Employee related costs 12 48 864 618 44 950 775

Depreciation and amortisation 13 2 504 153 2 105 700

Lease rentals on operating lease 14 3 863 504 1 175 604

General Expenses 15 24 708 325 18 380 947

Repairs and maintenance 18 21 563 161 584

Total expenditure 79 962 163 66 774 610

(Deficit) surplus for the year (6 488 915) 23 850 950

* See Note 24



96Department:


STATEMENT OF CHANGES IN NET ASSETSFOR THE YEAR ENDED 31 MARCH 2019

Accumulated Total Net

Surplus Assets

R R

Opening balance as previously reported 45 222 931 45 222 931Prior year adjustments (18 800) (18 800)Balance at 01 April 2017 as restated* 45 204 131 45 204 131Changes in net assetsSurplus for the year 23 850 950 23 850 950Total changes 23 850 950 23 850 950Restated* Balance at 01 April 2018 69 055 081 69 055 081Changes in net assetsSurplus for the year (6 488 915) (6 488 915)Total changes (6 488 915) (6 488 915)Balance at 31 March 2019 (refer to note 9) 62 566 166 62 566 166

* See Note 24



97

CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2019

* See Note 24

2019 2018

* Restated

Notes R R

Cash flows from operating activitiesReceiptsFees earned 22 996 623 24 089 522Grants 10 42 309 919 63 196 000Interest income 7 224 856 4 915 259Other income 573 593 2 156

73 104 991 92 202 937

PaymentsEmployee costs (48 864 618) (44 950 775)Suppliers (23 723 687) (21 833 592)

(72 588 305) (66 784 367)Net cash flows from operating activities 19 516 686 25 418 570

Cash flows from investing activities

Purchase of movable assets 4 (572 805) (83 002) Proceeds from claims 4 72 011 22 288Purchase of intangible assets 5 (227 837) (746 752)Net cash flows from investing activities (728 631) (807 466)

Net (decrease)/increase in cash and cash equivalents (211 945) 24 611 104Cash and cash equivalents at the beginning of the year 93 370 607 68 759 503Cash and cash equivalents at the end of the year 3 93 158 662 93 370 607



98Department:


STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS

FOR THE YEAR ENDED 31 MARCH 2019

Budget on Accrual Basis

Approved Adjustments Final Actual Difference Reference

budget Budget amounts on between

comparable final budget

basis and actual

R R R R R R

Statement of Financial

Performance

Revenue

Revenue from exchange

transactions

Rendering of services 27 059 100 - 27 059 100 23 336 615 (3 722 485) 29

Interest received (trading) 4 776 345 - 4 776 345 7 152 030 2 375 685 29

Miscellaneous other revenue 22 000 - 22 000 2 956 (19 044)

Recoveries - - - 570 637 570 637 29

Interest received - - - 72 826 72 826 29

Gains on disposal of assets - - - 28 265 28 265 29

Total revenue from

exchange transactions 31 857 445 - 31 857 445 31 163 329 (694 116)

Revenue from non-exchange

transactions

Transfer revenue

Government grants &

subsidies 42 104 000 - 42 104 000 42 309 919 205 919 29

Amounts rolled over / retained

from previous year 10 823 941 10 512 519 21 336 460 21 336 460 - 29

Total revenue 84 785 386 10 512 519 95 297 905 94 809 708 (488 197)

Expenditure

Personnel (56 084 665) 2 895 124 (53 189 541) (48 864 618) 4 324 923 29

Depreciation and amortisation (2 100 000) - (2 100 000) (2 504 153) (404 153) 29

Lease rentals on operating lease (4 913 000) - (4 913 000) (3 863 504) 1 049 496 29

Repairs and maintenance (180 000) - (180 000) (21 563) 158 437 29

General Expenses (18 307 721) (10 506 643) (28 814 364) (24 708 325) 4 106 039 29

Total expenditure (81 585 386) (7 611 519) (89 196 905) (79 962 163) 9 234 742

Surplus before capital

expenditure 3 200 000 2 901 000 6 101 000 14 847 545 8 746 545

Capital expenditure (3 200 000) (2 901 000) (6 101 000) (808 401) 5 292 599 29

Actual Amount on Comparable

Basis as Presented in

the Budget and Actual

Comparative Statement - - - 14 039 144 14 039 144



99

ACCOUNTING POLICIES

1. PRESENTATION OF CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

The consolidated annual financial statements have been prepared in accordance with the Standards of Generally Recognised

Accounting Practice (GRAP), issued by the Accounting Standards Board in accordance with Section 122(3) of the Public

Finance and Management Act, (Act 1 of 1999).

These consolidated annual financial statements have been prepared on an accrual basis of accounting and are in accordance

with historical cost convention as the basis of measurement, unless specified otherwise. They are presented in South African

Rand.

A summary of the significant accounting policies, which have been consistently applied in the preparation of these

consolidated annual financial statements, are disclosed below.

1.1 Government grants

Grants received or receivable are recognised when the resources that have been transferred meet the criteria for recognition

as an asset. A corresponding liability is raised to the extent that the grant is conditional. The liabilities are transferred to

revenue as and when the conditions are met. Grants without any conditions are recognised as revenue when the asset is

recognised

1.2 Cash and cash equivalents

Cash and cash equivalents are carried at fair value. For the purpose of the cash flow statements cash and cash equivalents

comprise cash on hand and deposits held at call with banks.

1.3 Movable assets

Movable assets are tangible non-current assets that are held for use in the production or supply of goods or services, rental

to others, or for administrative purposes, and are expected to be used during more than one period.

The cost of an item of movable assets is recognised as an asset when:

• it is probable that future economic benefits or service potential associated with the item will flow to the entity; and

• the cost of the item can be measured reliably.

Movable assets is initially measured at cost.

The cost of an item of movable assets is the purchase price and other costs attributable to bring the asset to the location and

condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates

are deducted in arriving at the cost.

Where an asset is acquired through a non-exchange transaction, its cost is its fair value as at date of acquisition.

Where an item of movable assets is acquired in exchange for a non-monetary asset or monetary assets, or a combination of

monetary and non-monetary assets, the asset acquired is initially measured at fair value (the cost). If the acquired item’s fair

value was not determinable, it’s deemed cost is the carrying amount of the asset(s) given up.

When significant components of an item of movable assets have different useful lives, they are accounted for as separate

items (major components) of movable assets.

Costs include costs incurred initially to acquire or construct an item of movable assets and costs incurred subsequently to

add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of movable assets,

the carrying amount of the replaced part is derecognised.

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also

included in the cost of movable assets, where the entity is obligated to incur such expenditure, and where the obligation

arises as a result of acquiring the asset or using it for purposes other than the production of inventories.



100Department:


1.3 Movable assets (continued)

Recognition of costs in the carrying amount of an item of movable assets ceases when the item is in the location and condition

necessary for it to be capable of operating in the manner intended by management.

Items such as spare parts, standby equipment and servicing equipment are recognised when they meet the definition of

movable assets.

Major inspection costs which are a condition of continuing use of an item of movable assets and which meet the recognition

criteria above are included as a replacement in the cost of the item of movable assets. Any remaining inspection costs from

the previous inspection are derecognised.

Movable assets are depreciated on the straight line basis over their expected useful lives to their estimated residual value. The

useful lives of items of movable assets have been assessed as follows:

Item Depreciation method Average useful life

Furniture and fixtures

Motor vehicles

Office equipment

Computer equipment

Straight line

Straight line

Straight line

Straight line

6 to 12 years

4 years

5 to 10 years

3 to 6 years

The depreciable amount of an asset is allocated on a systematic basis over its useful life.

Each part of an item of movable assets with a cost that is significant in relation to the total cost of the item is depreciated

separately.

The depreciation method used reflects the pattern in which the asset’s future economic benefits or service potential are

expected to be consumed by the entity. The depreciation method applied to an asset is reviewed at least at each reporting

date and, if there has been a significant change in the expected pattern of consumption of the future economic benefits or

service potential embodied in the asset, the method is changed to reflect the changed pattern. Such a change is accounted

for as a change in an accounting estimate.

The entity assesses at each reporting date whether there is any indication that the entity expectations about the residual

value and the useful life of an asset have changed since the preceding reporting date. If any such indication exists, the entity

revises the expected useful life and/or residual value accordingly. The change is accounted for as a change in an accounting

estimate.

The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of

another asset.

Items of movable 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 from the derecognition of an item of movable assets is included in surplus or deficit when the item is

derecognised. The gain or loss arising from the derecognition of an item of movable assets is determined as the difference

between the net disposal proceeds, if any, and the carrying amount of the item.

Assets which the entity holds for rentals to others and subsequently routinely sell as part of the ordinary course of activities,

are transferred to inventories when the rentals end and the assets are available-for-sale. Proceeds from sales of these assets

are recognised as revenue. All cash flows on these assets are included in cash flows from operating activities in the cash flow

statement.

The entity separately discloses expenditure to repair and maintain movable assets in the notes to the financial statements

(see note 4).

ACCOUNTING POLICIES (CONTINUED)



101

1.4 Intangible assets

An asset is identifiable if it either:

• is separable, i.e. is capable of being separated or divided from an entity and sold, transferred, licensed, rented or

exchanged, either individually or together with a related contract, identifiable assets or liability, regardless of whether

the entity intends to do so; or

• arises from binding arrangements (including rights from contracts), regardless of whether those rights are transferable

or separable from the entity or from other rights and obligations.

A binding arrangement describes an arrangement that confers similar rights and obligations on the parties to it as if it were

in the form of a contract.

An intangible asset is recognised when:

• it is probable that the expected future economic benefits or service potential that are attributable to the asset will

flow to the entity; and

• the cost or fair value of the asset can be measured reliably.

The entity assesses the probability of expected future economic benefits or service potential using reasonable and

supportable assumptions that represent management’s best estimate of the set of economic conditions that will exist over

the useful life of the asset.

Intangible assets acquired through an exchange transaction are initially recognised at cost.

Where an intangible asset is acquired through a non-exchange transaction, its initial cost at the date of acquisition is

measured at its fair value as at that date.

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognised when:

• it is technically feasible to complete the asset so that it will be available for use or sale.

• there is an intention to complete and use or sell it.

• there is an ability to use or sell it.

• it will generate probable future economic benefits or service potential.

• there are available technical, financial and other resources to complete the development and to use or sell the asset.

• the expenditure attributable to the asset during its development can be measured reliably.

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable

limit to the period over which the asset is expected to generate net cash inflows or service potential. Amortisation is not

provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that

the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life.

The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date.

Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that

the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised

over its useful life.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised

as intangible assets.

Internally generated goodwill is not recognised as an intangible asset.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:




102Department:


1.4 Intangible assets (continued)

Item Useful life

Computer software, internally generated 3 years

Computer software, other 3 to 6 years

Intangible assets under development no depreciation

The entity discloses relevant information relating to assets under construction or development, in the notes to the financial

statements (see note 5).

Intangible assets are derecognised:

• on disposal; or

• when no future economic benefits or service potential are expected from its use or disposal.

The gain or loss arising from the derecognition of an intangible assets is included in surplus or deficit when the asset is

derecognised (unless the Standard of GRAP on leases requires otherwise on a sale and leaseback).

1.5 Financial instruments

Initial recognition and measurement

Financial assets and liabilities are recognised when the entity becomes a party to the contractual provisions of the financial

instrument.

Trade receivables are stated at amortised cost, net of estimates for irrecoverable amounts. These types of financial instruments

arise out of the ordinary course of the entity’s activities through charging customers for legislated fees as well as recovery of

costs based on the work performed.

Trade payables are stated at amortised cost that is considered a reasonable approximation of the fair value thereof.

Credit Risk

Trade receivables are susceptible to credit risk, however this is adequately minimised as the charges are legislated and the

course of recovery is adequately provided for in the legislation. There has been no substantial change in this risk from the

previous period.

Receivables from exchange transactions

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using

the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in surplus or

deficit when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability

that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30

days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as

the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the

effective interest rate computed at initial recognition.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the deficit is

recognised in surplus or deficit within operating expenses. When a trade receivable is uncollectible, it is written off against

the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against

operating expenses in surplus or deficit.

Payables from exchange transactions

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective

interest rate method.




103

1.5 Financial instruments (continued)

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments

that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are

initially and subsequently recorded at fair value.

Liquidity Risk

The entity has sufficient funds and adequate funding sources to service its financial liabilities.

1.6 Operating leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is

classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

When a lease includes both land and buildings elements, the entity assesses the classification of each element separately.

Operating leases - lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between

the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability.

1.7 Impairment of non-cash-generating assets

Cash-generating assets are assets used with the objective of generating a commercial return. Commercial return means that

positive cash flows are expected to be significantly higher than the cost of the asset.

Non-cash-generating assets are assets other than cash-generating assets.

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition

of the loss of the asset’s future economic benefits or service potential through depreciation (amortisation).

Carrying amount is the amount at which an asset is recognised in the statement of financial position after deducting any

accumulated depreciation and accumulated impairment losses thereon.

A cash-generating unit is the smallest identifiable group of assets managed with the objective of generating a commercial

return that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or

groups of assets.

Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income

tax expense.

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.

Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transaction between

knowledgeable, willing parties, less the costs of disposal.

Recoverable service amount is the higher of a non-cash-generating asset’s fair value less costs to sell and its value in use.

Useful life is either:

• the period of time over which an asset is expected to be used by the entity; or

• the number of production or similar units expected to be obtained from the asset by the entity.

Value in use

Value in use of non-cash-generating assets is the present value of the non-cash-generating assets remaining service potential.

The present value of the remaining service potential of a non-cash-generating assets is determined using the following

approach:




104Department:


1.7 Impairment of non-cash-generating assets (continued)

Depreciated replacement cost approach

The present value of the remaining service potential of a non-cash-generating asset is determined as the depreciated

replacement cost of the asset. The replacement cost of an asset is the cost to replace the asset’s gross service potential.

This cost is depreciated to reflect the asset in its used condition. An asset may be replaced either through reproduction

(replication) of the existing asset or through replacement of its gross service potential. The depreciated replacement cost is

measured as the current reproduction or replacement cost of the asset, whichever is lower, less accumulated depreciation

calculated on the basis of such cost, to reflect the already consumed or expired service potential of the asset.

The replacement cost and reproduction cost of an asset is determined on an “optimised” basis. The rationale is that the entity

would not replace or reproduce the asset with a like asset if the asset to be replaced or reproduced is an overdesigned or

overcapacity asset. Overdesigned assets contain features which are unnecessary for the goods or services the asset provides.

Overcapacity assets are assets that have a greater capacity than is necessary to meet the demand for goods or services

the asset provides. The determination of the replacement cost or reproduction cost of an asset on an optimised basis thus

reflects the service potential required of the asset.

Recognition and measurement

If the recoverable service amount of a non-cash-generating asset is less than its carrying amount, the carrying amount of the

asset is reduced to its recoverable service amount. This reduction is an impairment loss.

An impairment loss is recognised immediately in surplus or deficit.

Any impairment loss of a revalued non-cash-generating asset is treated as a revaluation decrease.

When the amount estimated for an impairment loss is greater than the carrying amount of the non-cash-generating asset to

which it relates, the entity recognises a liability only to the extent that is a requirement in the Standards of GRAP.

After the recognition of an impairment loss, the depreciation (amortisation) charge for the non-cash-generating asset is

adjusted in future periods to allocate the non-cash-generating asset’s revised carrying amount, less its residual value (if any),

on a systematic basis over its remaining useful life.

Reversal of an impairment loss

The entity assess at each reporting date whether there is any indication that an impairment loss recognised in prior periods

for a non-cash-generating asset may no longer exist or may have decreased. If any such indication exists, the entity estimates

the recoverable service amount of that asset.

An impairment loss recognised in prior periods for a non-cash-generating asset is reversed if there has been a change in

the estimates used to determine the asset’s recoverable service amount since the last impairment loss was recognised. The

carrying amount of the asset is increased to its recoverable service amount. The increase is a reversal of an impairment loss.

The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying

amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised for

the asset in prior periods.

A reversal of an impairment loss for a non-cash-generating asset is recognised immediately in surplus or deficit. Any reversal

of an impairment loss of a revalued non-cash-generating asset is treated as a revaluation increase.

After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the non-cash-generating asset

is adjusted in future periods to allocate the non-cash-generating asset’s revised carrying amount, less its residual value (if

any), on a systematic basis over its remaining useful life.




105

1.8 Employee benefits

Short-term employee benefits

The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation

leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the

service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase

their entitlement or, in the case of non-accumulating absences, when the absence occurs.

The expected cost of surplus sharing and bonus payments is recognised as an expense when there is a legal or constructive

obligation to make such payments as a result of past performance.

Defined contribution plans

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

Payments made to industry-managed (or state plans) retirement benefit schemes are dealt with as defined contribution

plans where the entity’s obligation under the schemes is equivalent to those arising in a defined contribution retirement

benefit plan.

Post retirement benefits

The entity operates a defined contribution provident fund, the assets of which are held in a separate trustee administered

fund, to provide for these costs. All employees of the entity are entitled to membership of the plan, which is governed by the

Pension Funds Act of 1956.

Contributions are based on a percentage of the payroll and charged to the statement of financial performance in the year to

which they relate.

Other post retirement obligations

The entity has no obligation to fund post retirement medical benefits.

1.9 ProvisionsProvisions are recognised when the entity has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Employee entitlements to annual leave and annual bonuses are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and annual bonuses as a result of services rendered by employees up to the balance sheet date.

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

The entity recognises a provision for financial guarantees and loan commitments when it is probable that an outflow of resources embodying economic benefits and service potential will be required to settle the obligation and a reliable estimate of the obligation can be made.

Determining whether an outflow of resources is probable in relation to financial guarantees requires judgement. Indications that an outflow of resources may be probable are:

• financial difficulty of the debtor; • defaults or delinquencies in interest and capital repayments by the debtor; • breaches of the terms of the debt instrument that result in it being payable earlier than the agreed term and the

ability of the debtor to settle its obligation on the amended terms; and• a decline in prevailing economic circumstances (e.g. high interest rates, inflation and unemployment) that impact on

the ability of entities to repay their obligations.




106Department:


1.9 Provisions (continued)

Where a fee is received by the entity for issuing a financial guarantee and/or where a fee is charged on loan commitments, it

is considered in determining the best estimate of the amount required to settle the obligation at reporting date. W here a fee

is charged and the entity considers that an outflow of economic resources is probable, an entity recognises the obligation

at the higher of:

• the amount determined using in the Standard of GRAP on Provisions, Contingent Liabilities and Contingent Assets;

and

• the amount of the fee initially recognised less, where appropriate, cumulative amortisation recognised in accordance

with the Standard of GRAP on Revenue from Exchange Transactions.

1.10 Commitments

Items are classified as commitments when the Board has committed itself to future transactions that will normally result in

the outflow of resources.

Commitments are not recognised in the statement of financial position as a liability, but are included in the disclosure notes

in the following cases:

• approved and contracted capital commitments;

• where the capital expenditure has been approved and the contract has been awarded at reporting date; and

• where disclosure is required by a specific standard of GRAP.

1.11 Revenue

Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result

in an increase in net assets, other than increases relating to contributions from owners.

An exchange transaction is one in which the entity receives assets or services, or has liabilities extinguished, and directly

gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.

Revenue from license fees is recognised on an accrual basis in accordance with the term of the license agreement.

Measurement

Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.

Rendering of services

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with

the transaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcome

of a transaction can be estimated reliably when all the following conditions are satisfied:

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits or service potential associated with the transaction will flow to the entity;

• the stage of completion of the transaction at the reporting date can be measured reliably; and

• the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised

only to the extent of the expenses recognised that are recoverable.

Service revenue is recognised by reference to the stage of completion of the transaction at the reporting date. Stage of

completion is determined by services performed to date as a percentage of total services to be performed.

Interest, royalties and dividends

Interest income is accrued on a time proportion basis, taking into account the principal amount and the effective interest

rate. Interest is recognised, in surplus or deficit, using the effective interest rate method.




107

1.12 Revenue from non-exchange transactions

Non-exchange transactions are defined as transactions where the entity receives value from another entity without directly

giving approximately equal value in exchange.

Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result

in an increase in net assets, other than increases relating to contributions from owners.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties

in an arm’s length transaction.

1.13 Comparative figures

Where necessary, comparative figures have been reclassified to conform to changes in presentation in the current year or to

improve the readability and understanding of the financial statements.

1.14 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.

1.15 Irregular expenditure

Irregular expenditure as defined in section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred in

contravention of or that is not in accordance with a requirement of any applicable legislation, including -

(a) this Act; or

(b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or

(c) any provincial legislation providing for procurement procedures in that provincial government.

National Treasury practice note no. 4 of 2008/2009 which was issued in terms of sections 76(1) to 76(4) of the PFMA requires

the following (effective from 1 April 2008):

Irregular expenditure that was incurred and identified during the current financial year and which was condoned before year

end and/or before finalisation of the financial statements must also be recorded appropriately in the irregular expenditure

register. In such an instance, no further action is also required with the exception of updating the note to the financial

statements.

Irregular expenditure that was incurred and identified during the current financial year and for which condonement is being

awaited at year end must be recorded in the irregular expenditure register. No further action is required with the exception of

updating the note to the financial statements.

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 financial statements must be updated with the amount condoned.

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 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 programme/expenditure item, be disclosed as such in the note to the financial statements and updated accordingly

in the irregular expenditure register.




108Department:


1.16 Budget information

The approved budget is prepared on a accrual basis and presented by economic classification linked to performance outcome

objectives.

The approved budget covers the fiscal period from 01/04/2018 to 31/03/2019.

The consolidated annual financial statements and the budget are on the same basis of accounting therefore a comparison

with the budgeted amounts for the reporting period have been included in the Statement of comparison of budget and

actual amounts.

1.17 Related parties

A related party is a person or an entity with the ability to control or jointly control the other party, or exercise significant

influence over the other party, or vice versa, or an entity that is subject to common control, or joint control.

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Joint

control is the agreed sharing of control over an activity by a binding arrangement, and exists only when the strategic financial

and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the venturers).

Related party transaction is a transfer of resources, services or obligations between the reporting entity and a related party,

regardless of whether a price is charged.

Significant influence is the power to participate in the financial and operating policy decisions of an entity, but is not control

over those policies.

Management are those persons responsible for planning, directing and controlling the activities of the entity, including

those charged with the governance of the entity in accordance with legislation, in instances where they are required to

perform such functions.

Close members of the family of a person are considered to be those family members who may be expected to influence, or

be influenced by, that management in their dealings with the entity.

The entity is exempt from disclosure requirements in relation to related party transactions if that transaction occurs within

normal supplier and/or client/recipient relationships on terms and conditions no more or less favourable than those which it

is reasonable to expect the entity to have adopted if dealing with that individual entity or person in the same circumstances

and terms and conditions are within the normal operating parameters established by that reporting entity’s legal mandate.

Where the entity is exempt from the disclosures in accordance with the above, the entity discloses narrative information

about the nature of the transactions and the related outstanding balances, to enable users of the entity’s financial statements

to understand the effect of related party transactions on its consolidated annual financial statements.




109

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS


2019 2018* Restated

R R

2. Trade and other receivablesTrade debtors 1 217 873 351 150Deposits 17 575 7 250Accrued interest 421 405Prepaid expenses 396 579 134 351Sundry debtors 27 272 5 844Study assistance 28 300 64 233Accrued income (refer to note 2.1) 1 709 872 1 587 490

3 397 892 2 150 723

Trade and other receivables - provision for doubtful debts

As of 31 March 2019, trade and other receivables of R 52 764 (2018: R 52 764) were provided for.

The ageing of these amounts is as follows:

Over 6 months 52 764 52 764

Reconciliation of provision for doubtful debtsOpening balance 52 764 52 764

2.1 Accrued incomeAccrued income comprises of the following:

Recovery of expenditure 578 349 -Legal fee recoveries 569 901 -Interest accrued 561 622 562 490Grant receivable - 1 025 000

1 709 872 1 587 490

Recovery of expenditure relates to the accrual of expenditure incurred by the entity on behalf of the KZN Liquor Authority for

the secondment of an employee to the latter. The entity has accrued for the salary costs that is to be recovered.

Legal fee recovery represents the anticipated amount that the entity will collect after being awarded a cost order in its favour

by a court.

Interest accrued at year end represents the interest earned on all bank accounts up to 31 March but received after year end.

Grant receivable relates to an amount that was due from Provincial Treasury during the 2016/17 financial year but was not paid

until the current financial year. Provincial Treasury held back the amount from the entity’s grant allocation to cater for costs

relating to legal matters involving the entity.

* See Note 24



110Department:


NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (continued)


2019 2018* Restated

R R

3. Cash and cash equivalentsCash and cash equivalents consist of:Cash on hand 3 640 3 719Bank balances 81 203 676 81 974 699Short-term deposits 12 248 445 11 532 728Credit card (297 099) (140 539)

93 158 662 93 370 607

Current assets 93 455 761 93 511 146Current liabilities (credit card) (297 099) (140 539)

93 158 662 93 370 607

2019 2018

Cost /

Valuation

Accumulated

depreciation

and

accumulated

impairment

Carrying

value

Cost /

Valuation

Accumulated

depreciation

and

accumulated

impairment

Carrying

value

4. Movable assetsFurniture and fixtures 467 100 (337 104) 129 996 444 403 (324 546) 119 857Motor vehicles 425 937 (362 046) 63 891 475 459 (404 140) 71 319Office equipment 499 837 (338 590) 161 247 476 374 (348 559) 127 815Computer equipment 7 218 355 (5 527 230) 1 691 125 6 778 712 (4 798 515) 1 980 197Total 8 611 229 (6 564 970) 2 046 259 8 174 948 (5 875 760) 2 299 188

Opening

balance

Additions Disposals Depreciation Total

Reconciliation of movable assets - 2019Furniture and fixtures 119 857 28 580 (1 918) (16 523) 129 996Motor vehicles 71 319 - (7 428) - 63 891Office equipment 127 815 74 505 (17 648) (23 425) 161 247Computer equipment 1 980 197 469 720 (16 752) (742 040) 1 691 125

2 299 188 572 805 (43 746) (781 988) 2 046 259

Opening

Balance

Additions Disposals Depreciation Total

Reconciliation of movable assets - 2018Furniture and fixtures 82 635 50 781 - (13 559) 119 857Motor vehicles 71 319 - - - 71 319Office equipment 141 817 5 324 - (19 326) 127 815Computer equipment 2 624 526 26 897 (19 555) (651 671) 1 980 197

2 920 297 83 002 (19 555) (684 556) 2 299 188

* See Note 24



111



2019 2018

Cost /

Valuation

Accumulated

depreciation

and

accumulated

impairment

Carrying

value

Cost /

Valuation

Accumulated

depreciation

and

accumulated

impairment

Carrying

value

5. Intangible assetsComputer software, 4 742 562 (2 710 280) 2 032 282 4 514 725 (1 205 371) 3 309 354internally generatedComputer software 2 335 665 (1 985 042) 350 623 2 335 665 (1 767 787) 567 878Total 7 078 227 (4 695 322) 2 382 905 6 850 390 (2 973 158) 3 877 232

2019 2018* Restated

R R

4. Movable assets (continued)The entity received net insurance proceeds of R72 012 (2018: R 22 288) at year end in respect of claims for the theft

and damage of assets.

Expenditure incurred to repair and maintain property, plant and

equipmentExpenditure incurred to repair and maintain property, plant and

equipment included in Statement of Financial PerformanceGeneral expenses - 47 259Repairs and maintenance - 10 516

- 57 775 The above represent amounts expended by the entity for the repair and maintenance of movable assets. It excludes

amounts paid in terms of operating leases and general operating expenditure relating to movable assets.

Opening

balance

Additions Disposals Total

Reconciliation of intangible assets - 2019Computer software, internally generated 3 309 354 227 837 (1 504 909) 2 032 282Computer software 567 878 - (217 255) 350 623

3 877 232 227 837 (1 722 164) 2 382 905

Opening

balance

Additions Disposals Total

Reconciliation of intangible assets - 2018Computer software, internally generated 3 794 663 720 062 (1 205 371) 3 309 354Computer software 756 960 26 690 (215 772) 567 878

4 551 623 746 752 (1 421 143) 3 877 232

* See Note 24



112Department:


2019 2018* Restated

R R

5. Intangible assets (continued)Intangible assets under developmentCumulative expenditure recognised in the carrying value of Intangible

assetsIntangible assets under development 797 713 569 876

The entity, with the assistance of SITA, is currently developing an integrated regulatory system (i.e. software) that will

enable it to streamline the processes relating to licensing, registration, monitoring and compliance. The first phase

of the development was implemented during the year with phase 2 in development at year end and testing due to

commence after year end.

6. Operating lease liabilityCurrent liabilities 498 395 114 557

The operating lease liability arose from the lease for the Pietermaritzburg and Durban offices.

7. Payables from exchange transactionsTrade payables 545 299 592 902Income received in advanced 26 502 053 25 594 876Cash guarantees received from licensees 2 141 014 1 425 047Third party payments 1 068 777 908 338Sundry creditors 76 688 68 688Leave pay accrual 2 115 159 1 856 616Accrued expenses (refer note 7.1) 4 360 628 1 968 731

36 809 618 32 415 198

Income received in advance relates to revenue received from licensees for services to be rendered by the entity, the

majority of the balance comprises of annual licence fees for the next financial year.

The cash guarantees received from licensees are security for any fees or penalties prescribed in terms of the KZN Gaming

& Betting Act, as amended, taxes determined in terms of the KZN Gaming & Betting Tax Act, or any gambling debts

payable by the licensee.

Amounts due to third parties refer to payments to be made on behalf of employees to the provident fund and medical

aid.

Maturity analysis of Trade and other payables

Liquidity Risk Not later than a month 28 116 129 27 096 117Later than a month and not later than three months 4 437 316 2 037 419Later than three months and not later than a year 4 256 173 3 281 663

36 809 618 32 415 199

The entity has sufficient cash resources to meets the above obligations.



* See Note 24



113

2019 2018* Restated

R R

7. Payables from exchange transactions (continued)7.1 Accrued expenses

Accrued expenses comprises of the followingExpenditure relating to Board remuneration 1 276 791 82 430Capital expenditure 569 876 569 876Current expenditure 2 513 961 1 316 425

4 360 628 1 968 731

Accrued expenses relating to Board members represents fees due to the erstwhile board members for meetings they

attended prior to their term ending.

Accrued expenses for capital expenditure relate to expenditure incurred for the development of the online regulatory

system (refer to note 5).

Accrued expenses for current expenditure relate to goods and services rendered at year end but not yet invoiced.

Accrued expenses in respect of subsistence and travel claims relate to official trips undertaken by employees before

year end that were not yet paid.

8. Taxes and transfers payable (non-exchange)Gambling tax payable 96 347 73 794Statutory payables 1 015 192 39 120

1 111 539 112 914

Gambling tax payable refers to taxes collected on behalf of the Province from all licensees in terms of the KZN Gaming and Betting Act. The amount represents taxes received in advance, amounts due to the Province or refunds due to licensees.

Statutory payables refer to the various payroll taxes and levies payable to the South African Revenue Service.



* See Note 24



114Department:




2019 2018* Restated

R R

9. Accumulated surplusReconciliation of accumulated surplus2012 - Net assets acquired from erstwhile entities 25 081 667 25 081 6672012 - Deficit realised (4 176 104) (4 176 104)2013 - Surplus realised 6 941 425 6 941 4252014 - Surplus realised 10 430 950 10 430 9502014 - Prior year adjustments (2012) 1 244 954 1 244 9542015 - Surplus realised 11 684 747 11 684 7472015 - Amount surrendered to Provincial Revenue Fund (20 800 000) (20 800 000)2015 - Prior year adjustments (2013) (37 786) (37 786)2016 - Prior year adjustments (2014) (72 805) (72 805)2016 - Surplus realised 4 460 584 4 460 5842017 - Prior year adjustments 1 272 546 1 272 5462017 - Surplus realised 9 192 753 9 192 7532018 - Surplus realised 23 850 950 23 850 9502019 - Prior year adjustment (2017) (18 800) (18 800)2019 - Loss for the year (6 488 915) -

62 566 166 69 055 081

Ring-fenced internal funds and reserves within accumulated surplusBuilding investmentOpening balance 25 588 660 6 254 196Interest earned 1 506 881 473 972Amount spent during the year (2 955 837) (1 172 508)Funds returned from Provincial Treasury - 20 033 000

24 139 704 25 588 660

The above funds have been reserved for the purposes of acquiring suitable office accommodation for the entity. During the

2018 year Provincial Treasury returned the R20 million that was previously surrendered.

The funds are invested by the entity until such time as they are required (refer to note 3). The interest earned on these retained

amounts forms part of the amount disclosed in the statement of financial performance (refer to note 11).

* See Note 24



115



2019 2018* Restated

R R

10. RevenueRendering of services 23 336 615 22 437 270Interest income 7 152 030 4 915 259Sundry income 2 956 2 156Interest received 72 826 72 142Recoveries 570 637 -Government grants & subsidies 42 309 919 63 196 000

73 444 983 90 622 827

The amount included in revenue arising from exchanges of goods orservices are as follows:Rendering of services 23 336 615 22 437 270Interest income 7 152 030 4 915 259Sundry income 2 956 2 156Interest received 72 826 72 142Recoveries 570 637 -

31 135 064 27 426 827

Included in recoveries is an amount of R569 901 relating to cost awards for legal expenses issued in favour of the Board

by the courts.

The amount included in revenue arising from non-exchange transactions is

as follows:

Transfer revenueGovernment grants & subsidies 42 309 919 63 196 000

11. InterestInterest incomeBank and investments 7 152 030 4 915 259

Included in interest received is an amount of R1 506 881 (2018: R 473 972 ) that accrued to the Building Investment

(note 9). This amount even though included in income, do not form part of the operating income of the entity.

* See Note 24



116Department:




2019 2018* Restated

R R

12. Employee related costsBasic remuneration 43 615 871 39 962 680Performance bonus 32 960 70 733Cell phone allowance 226 209 227 894Leave pay accrual 258 543 233 447Medical aid subsidy 2 485 993 2 144 504Long-service awards 313 000 -Acting allowances 130 943 -Temporary employees 337 321 726 392Provident fund costs and risk benefits 1 199 376 1 301 955Termination benefits 83 774 156 721Reallocation Allowance 47 634 -Unemployment insurance 132 994 126 449

48 864 618 44 950 775

Basic

remuneration

Allowances and

Long Service

Award

Contributions Total

Senior management renumerationFor the year ended 31 March 2019

PN Baloyi Chief Executive Officer 1 665 271 35 500 194 602 1 895 373BE Radebe Senior Manager - Licensing &Registration (See note) 1 027 963 51 500 120 127 1 199 590RS Goodayle Senior Manager - Gaming,Monitoring & Compliance 1 023 629 56 500 124 469 1 204 598PJ Stretch Head - Governance Risk & PJPCompliance 1 027 963 52 500 120 127 1 200 590V Ramdas Chief Financial Officer 1 015 195 47 500 133 886 1 196 581RC Bestel Senior Manager - BettingMonitoring & Control 998 158 61 500 149 724 1 209 382M Ngwenya Chief Legal Officer 998 990 12 000 149 848 1 160 838

7 757 169 317 000 992 783 9 066 952

* See Note 24



117



Basic

remuneration

Allowances and

Long Service

Award

Contributions Total

12. Employee related costs (continued)For the year ended 31 March 2018PN Baloyi Chief Executive Officer 1 560 032 16 500 182 341 1 758 873BE Radebe Senior Manager - Licensing& Registration 958 465 43 500 112 029 1 113 994RS Goodayle Senior Manager - GamingMonitoring & Compliance 954 416 43 500 116 078 1 113 994PJ Stretch Head Governance, Risk &Compliance 958 465 43 500 112 029 1 113 994V Ramdas Chief Financial Officer 946 920 43 500 124 466 1 114 886RC Bestel Senior Manager Betting Monitoring & Control 930 864 43 500 139 630 1 113 994M Ngwenya Chief Legal Officer 931 640 12 000 139 746 1 083 386

7 240 802 246 000 926 319 8 413 121

Mr Radebe was seconded to the KwaZulu-Natal Liquor Authority with effect from 08 October 2018 to assist with the

vacant Chief Executive Officer position. As agreed between the parties, the Board paid the salary of Mr Radebe during

this period and the KwaZulu-Natal Liquor Authority was responsible for the payment of the acting allowance and travel

expenses. The Board has raised a recoverable of R578 349 at year end. The value disclosed above is the full amount paid

to Mr Radebe for the period.

2019 2018* Restated

R R

13. Depreciation and amortisationAmortisation (refer to note 5 ) 1 722 165 1 421 144Depreciation (refer to note 4) 781 988 684 556

2 504 153 2 105 700

14. Lease rentals on operating leasePremisesContractual amounts 3 580 457 893 004EquipmentContractual amounts 283 047 282 600

3 863 504 1 175 604

* See Note 24



118Department:




2019 2018* Restated

R R

15. General expensesAdvertising, Publications and Public Hearings 147 909 90 464Audit committee fees 142 934 158 174Auditors remuneration (refer to note 17) 770 127 875 968Bank charges 78 288 91 069Board remuneration (refer to note 16) 3 340 223 3 744 064Cleaning 223 401 2 571Computer expenses 1 428 228 938 816Conferences and seminars 40 119 113 865Consulting and professional fees 487 358 1 887 969Courier & postage 9 420 30 914Electricity 500 879 412 086Entertainment - 2 610External meeting refreshments 72 491 21 125Fleet expenses 149 671 135 378Gifts 700 -Illegal gambling operations 24 108 33 226Insurance 367 214 365 469Internal audit 474 150 796 912Legal expenses 5 144 242 1 090 734Levies (statutory) 514 032 504 229Office set-up and restoration costs 2 863 141 1 172 508Licensing, investigation and monitoring costs 574 417 599 448Marketing 643 443 39 333Printing and stationery 341 953 240 816Probity checks 10 150 47 022Security 8 336 34 575Software licenses and support 2 196 187 1 619 047Staff placement costs 65 314 178 445Staff welfare 135 939 160 934Subscriptions 12 119 8 340Telephone and fax 720 230 548 642Training 381 768 598 271Travel - overseas 624 526 -Uniforms 553 -Travel and subsistence 2 214 755 1 814 048Venue expenses - 23 875

24 708 325 18 380 947

Consulting and professional fees - During the 2018 year, the Board engaged a consultant to assist with the HR functions of the entity until the post was filled. In addition, the entity engaged consultants to assist with the financial and HR systems.Software licenses and support - During 2018, the first phase of the internally developed regulatory system went live, this accounted for the increase in the support costs payable for assistance and maintenance of the system. These costs continued into the current year.Office set-up and restoration costs - During the 2019, the entity moved its Pietermaritzburg operations into new premises and incurred these costs to set-up the office and to move in.Legal expenses increased due to litigation brought by a licensees/applicants in respect of decisions made by the Board.

* See Note 24



119



Members’

fees

Reimbursive

expenses

Total

16. Board remunerationNon-executive2019Dr SG Ngcobo 366 827 20 124 386 951Ms MP Myeni 449 736 20 504 470 240Adv KP Thango 361 752 10 194 371 946Ms ZP Tenza 407 601 8 133 415 734Mr LS Gabela 437 166 41 056 478 222Mr SS Zondi 256 440 624 257 064Dr TI Nzimakwe 252 799 10 095 262 894Prof. BS Stobie 373 067 4 485 377 552Mr SN Chetty 313 974 5 646 319 620

3 219 362 120 861 3 340 223

Members’

fees

Reimbursive

expenses

Total

2018Adv BS Khuzwayo 555 000 22 402 577 402Mr ED Mpanza 484 000 14 761 498 761Mr SN Chetty 472 000 17 078 489 078Mrs H Hart 412 000 12 386 424 386Adv ND Hollis SC 418 000 19 442 437 442Mr PM Miller 396 000 5 403 401 403Mrs ST Mthembu 440 000 102 393 542 393Ms B Zulu 350 000 23 200 373 200

3 527 000 217 065 3 744 065

2019 2018* Restated

R R

17. Auditors’ remunerationFees 770 127 875 968

18. Repairs and maintenanceOffice buildings 21 563 132 659Office equipment - 28 925

21 563 161 584

Expenditure in respect of office buildings includes the entity’s share of the repairs and maintenance costs relating to

the space occupied in Pietermaritzburg.

* See Note 24



120Department:




2019 2018* Restated

R R

19. Cash generated from operations(Deficit) surplus (6 488 915) 23 850 950Adjustments for:Depreciation and amortisation 2 504 153 2 105 700(Gain) / Loss on disposal of assets (28 265) (2 733)Movements in operating lease assets 383 838 114 557Changes in working capital:Trade and other receivables (1 247 169) (299 438)Payables from exchange transactions 4 394 419 285 424Taxes and transfers payable (non exchange) 998 625 (635 890)

516 686 25 418 570

20. Related partiesRELATIONSHIPSMembers Refer to members’ report noteUltimate controlling entity KwaZulu-Natal Provincial LegislatureControlling entity Office of the Premier (until 31 March 2019) Department

of Economic Development, Tourism and Environmental

Affairs (effective 01 April 2019)Related entity Transformation Fund (Controlled by the same Accounting

Authority)Senior Management Details of Senior Managers are provided in note 12

Related party transactionsCollection of gambling taxes on behalf of the ProvinceOffice of the Premier 679 505 576 308 185 808

The entity is responsible for the collection and distribution of all gambling taxes payable to the Province in terms

of the KwaZulu-Natal Gaming & Betting Tax Act, Act 9 of 2010 (as amended). The entity was initially only responsible

for taxes payable by the horseracing and betting sectors. However, with effect from 01 November 2017, the entity

became responsible for all the collection and distribution of all gambling taxes.

The values reflected above represents the actual cash distributed for the Province in terms of the Act.

Grant recievedOffice of the Premier 42 310 000 63 196 000

Secondment of employee to KZN Liquor AuthorityEmployee costs (recoverable) 578 349 -

* See Note 24



121



2019 2018* Restated

R R

21. TaxationThe entity is exempted from the payment of income tax.

22. Employee benefit obligationsDefined contribution planIt is the policy of the entity to provide retirement benefits to all its employees. A defined contribution provident fund

which is subject to the Pensions Fund Act exist for this purpose.

The amount recognised as an expense for defined contribution plans is 6 337 975 5 777 990

23. Comparative figures

Certain comparative figures have changed as a result of rounding. In addition, certain comparative figures have been

reclassified to improve the readability and understanding of the financial statements.

Employee related costs - note 12, has been reclassified to improve the understanding of the financial statements. In the

prior year the entity disclosed the costs associated with the provident fund as part of Basic salary. This amount has been

disclosed separately in the current year to enhance the readers understanding of the financial statements. The change

only amended the disclosure in the note and had no effect on the statement of financial performance, statement of

financial position or cash flow statement.

24. Prior period errors

Prior period error 1 - Income taken to income in advance:

During the previous year an amount of R120 000 was recognised as income in advance instead of income. This has been

corrected to reflect the amount in the income statement as income for the period.

Prior period error 2 - Incorrect treatment of Study Assistance provided to employees:

In the past the entity treated study assistance provided to employees as a loan and recognised the expenditure on

the employee passing the relevant exam. During the previous financial year, the auditors flagged this as the incorrect

treatment. As a result the entity has amended the treatment to recognise the expenditure immediately and to raise a

recoverable if the employee does not pass. As a result the opening accumulated surplus balance was reduced by R18

800, additional expenditure of R76 200 was recognised in the prior year and debtors balance was reduced by R95 000.

The cashflow statement was adjusted accordingly.

Prior period error 3 - Prepaid expenditure not reversed:

An amount of R60 236 in respect of prepaid expenses was not accounted for as expenditure during the prior period. This

error has now been corrected resulting in an increase in expenditure and a decrease in trade and other receivables.

The effects of the changes are shown below:

* See Note 24



122Department:




2019 2018* Restated

R R

24. Prior period errors (continued)

Statement of financial positionAccumulated surplus (decrease) - 18 800Trade and other receivables (decrease) - (155 236)Payables from exchange transactions (decrease) - 120 000

Statement of financial performanceRevenue from exchange transactions (increase) - 120 000General expenses (increase) - (76 200)Lease rentals on operating leases (increase) - (60 236)

25. CommitmentsAuthorised capital expenditureAmounts contracted for• Intangible assets 1 393 914 1 620 914

Total capital commitmentsAlready contracted for but not provided for 1 393 914 1 620 914

Total commitments

Total commitmentsAuthorised capital expenditure 1 393 914 1 620 914

Operating leases - as lessee (expense)Minimum lease payments due- within one year 4 427 099 1 314 770- in second to fifth year inclusive 15 024 824 2 982 428

19 451 923 4 297 198

Operating lease payments represent the rental payable by the entity for the leasing of certain of its equipment

and for the leasing of office space in Pietermaritzburg and Durban.

* See Note 24



123



26. Contingencies

• Afrisun KZN (Pty) Ltd vs KwaZulu-Natal Gaming & Betting Board and Various Unnamed Respondents - Afrisun is

seeking an interdict to stop the Board from considering applications in respect of bingo halls to operationalise

electronic bingo terminals. The Board is defending the matter. The legal representatives of the the Board are confi-

dent that its defence will be successful. However, a cost order is sought against Board if its defence is unsuccessful.

The estimated costs for counsel to complete the litigation is estimated at R1,5 million.

• Afrisun KZN Pty LTd vs the Premier of KZN and others - The applicant is seeking to set aside the Board’s decision

with regards to Bingo. The Board intially sought to abide the decision of the court but then became an active par-

ticiapant in the matter. The legal representatives of the the Board are confident that its defence will be successful.

However, a cost order is sought against Board if its defence is unsuccessful. At this stage it is not possible to rea-

sonably quantify the costs should such an order be made against the Board. The estimated costs for our counsel is

approximately R3 million.

• Hollywood Sportsbook KwaZulu-Natal (Pty) Ltd vs KwaZulu-Natal Gaming and Betting Board and Estate Late Wil-

liam Legassick - Hollywood Sportsbook is challenging the Board’s decision to reject their application based on its

ownership not being in line with the Act. The legal representatives of the the Board are confident that its defence

will be successful. However, a cost order is sought against Board if its defence is unsuccessful. At this stage it is not

possible to reasonably quantify the costs should such an order be made against the Board. The estimated costs for

counsel is R2 million.

• The Peoples Forum Against EBTs vs KZNGBB - The applicant is seeking to set aside the Board’s decision with regards

to the installation of EBT’s. The Board is opposing the matter and as such could be liable for costs if an award is

made against it. At this stage it is not possible to reasonably quantify the costs should such an order be made

against the Board. The estimated costs for counsel in the matter is R1,5 million.

• Afrisun vs KZNGBB and 22 Others - the applicant brought an application in terms of PAJA seeking to set aside

the Board’s decision to approve applications for the renewal of Bingo licenses. The Board is opposing the matter.

The legal representatives of the the Board are confident that its defence will be successful. However, a cost order is

sought against Board if its defence is unsuccessful. At this stage it is not possible to reasonably quantify the costs

should such an order be made against the Board. The estimated costs for counsel is R3,5 million.

• Marshalls World of Sport (Pty) Ltd and Another vs KwaZulu-Natal Gaming and Betting Board and Others - Marshalls

World of Sport is seeking to set aside the decision of the Board to refer an appeal made by Marshall, against a

decision of a sub-committee of the Board, to the responsible MEC. The matter is still to be set down for a hearing.

The legal representatives of the the Board are confident that its defence will be successful. However, a cost order

is sought against Board if its defence is unsuccessful. It is estimated that costs could amount to R300 000.

• Marshalls World of Sport (Pty) Ltd and Another vs KwaZulu-Natal Gaming and Betting Board and Others (second

matter) - Marshalls World of Sport is seeking to set aside the decision of the Board to refer an appeal made by Mar-

shall, against a decision of a sub-committee of the Board, to the responsible MEC. The matter is still to be set down

for a hearing. The legal representatives of the the Board are confident that its defence will be successful. However,

a cost order is sought against Board if its defence is unsuccessful. It is estimated that costs could amount to

R300 000.

• Tupac Business Enterprises CC vs The Chairperson of the Board, KwaZulu-Natal Gaming & Betting Board and Others

- Tupac Enterprises is seeking to set aside the decision of the Board to award the tender for the provision of office

accommodation in Pietermaritzburg to another service provider. The court found in favour of the Board, however

Tupac has been granted leave to appeal. The estimated costs for counsel is R250 000.



124Department:




26. Contingencies (continued)

• Galaxy Bingo Durban CBD (Pty) Ltd vs The Chairperson of the Board, KwaZulu-Natal Gaming & Betting Board and

Others - Galaxy Bingo Durban CBD has made an application seeking to review the decision of the Board to award

rights to operate independent site operator limited payout machines to itself and others. The Board has resolved

to abide the decision of the court. In the event that the review is successful, the Board may be required to refund

application fees of approximately R1,3 million which was recognised in revenue in the 2016 financial year.

2019 2018* Restated

R R

27. Fruitless and wasteful expenditureOpening balance 85 005 -Fruitless and wasteful- current year 656 85 005Fruitless and wasteful expenditure closing balance 85 661 85 005

Interest and penalties arose due to the late payment of SARS and suppliers. A system glitch resulted in the late payment

of SARS, on discovery the amount was immediately repaid. An application has been made to the SARS for the waiver of

the interest and penalties and the matter was not finalised at year end..

The current year amount relates to interest charged for late payment of invoices and was due to the invoices not being

sent timeously by the service provider.

28. Irregular expenditure Opening balance 2 889 518 1 798 784Irregular Expenditure - current year (Incident 3) 331 255 -Irregular expenditure - current year (Incident 2) 2 668 745 1 090 734

5 889 518 2 889 518

Analysis of expenditure awaiting condonation per age classificationCurrent year 3 000 000 1 090 734Prior years 2 889 518 1 798 784

5 889 518 2 889 518

* See Note 24



125



28. Irregular expenditure (to be updated with condonation) (continued)

Details of irregular expenditure

Incident 1 - Board remuneration.

In 2015, Provincial Treasury conducted

an audit into the remuneration paid to

former board members and the number

of meetings held. The report identified a

potential over payment of R1,798,784 to

members. The report recommended that the

MEC of Finance implement procedures for

the recovery of the amounts. The entity has

approached the MEC for the condonation of

the amount.

Disciplinary steps taken/

criminal proceedings

The matter is with the MEC

of Finance and the Provincial

Treasury to implement the steps

as recommended per the report.

1 798 784

Incident 2 - Legal fees

The process for the appointment of legal

service providers was deemed to be irregular

by the Auditor-General, in that they felt

that the deviation process followed did not

fully articulate the circumstances prior to

the approval to deviate by the Accounting

Authority. The matter has been resolved with

the appointment of a new legal panel and

a revised engagement model. Furthermore,

the Accounting Authority considered and

condoned the appointment of the legal

service providers thereby rectifying the

deviation from SCM principles in November

2018. The matter will be referred to Provincial

Treasury for a final review and confirmation

per the direction of the Auditor-General.

No employee was found to be

negligent in the matter

3 759 479

Incident 3 - Expired Contracts

The entity made use of contracts that had

expired. The matter is still being investigated

to determine the extent of the irregular

expenditure and the persons, if any,

responsible for incurring such.

To be investigated

331 255

5 889 518



126Department:


29. Budget differencesMaterial differences between budget and actual amountsThe material differences between the budget and actual amounts can be attributed to the following:

• Fees earned - The entity budgeted for adjustments to the license fees which did not materialise in the current

financial year. Furthermore the number of anticipated applications were not realised during the year contributing

to the decreased collection.

• Interest received - Included in the amount is interest in respect of the building investment (refer to note 11)

which is not regarded as part of the operating budget.The remainder of the variance was due to increased interest

rates and larger cash balances, the latter as a result of the entity now collecting all taxes prior to distribution

thereof on behalf of the Provincial Treasury.

• Recoveries - The entity was successful in defending certain litigation initiated against it and the court awarded

costs in favour of the entity. As a result the entity has accrued for recoveries relating to past legal costs.

• Personnel - The process for the filling of vacant positions on the structure or resignations has contributed to the

large variance for compensation. In certain instances where temp employees or consultants could be utilised the

entity engaged such.

• Lease rentals on operating leases - The entity planned to secure suitable office accommodation for its

Pietermaritzburg operations from the start of the financial year and budgeted for a full year rental. However the

process was delayed due to challenges experienced within the procurement process resulting in the variance.

ª Repairs and maintenance - The entity planned to secure suitable office accommodation for its Pietermaritzburg

operations and made provision in the budget for its operational needs. However the process was delayed due to

challenges experienced within the procurement process resulting in the variance.• Goods and services - The entity experienced under expenditure for the year due to the following reasons:

(a) Training - capacity constraints within the HR division impacted the rollout of the training programme for the

year.

(b) Investigation costs - the non-processing of applications received in respect of previous requests for

applications, due to challenges, resulted in under expenditure under this item.

(c) Marketing and advertising - delays in the roll out of the marketing plan for the year and outreach

programmes. The entity did not spend its budget on adverts for vacancies due to the delays referred to

above.

(d) General reductions in levels of expenditure were realised with the improvement of current contracts and by

implementation of stringent controls over expenditure.

(e) There were a number of projects that were on the go at year end and which will be rolled over into the next

financial year.

• Capital expenditure - The implementation of the online regulatory system was still on-going at year end and

the expected levels of expenditure did not materialise. The entity was also in the process of acquiring additional

software and the replacement of furniture at year end.





127



29. Budget differences (continued) Changes from the approved budget to the final budgetThe changes between the approved and final budget were a consequence of changes in the overall budget parameters.

The changes made to the approved budget were as follows:

• Compensation of employees - Due to the challenges experienced within the recruitment process the entity

realised under expenditure and these amounts were transferred to operational expenditure to cater for increased

legal costs and other spending pressures.

• Lease rentals on operating lease - The lease for the Pietermaritzburg office resulted in increased levels of

expenditure.

• General expenses - Budget from other classes were moved to good and services to cater for certain budget

pressures and to support operations.

• Capital expenditure - the budget was increased by the additional allocation of R2,9 million to cater for the

compliance system and the regulatory system development as well as the purchase of furniture.

At amortised

cost

Total

R R

30. Financial instruments disclosureCategories of financial instruments2019Financial assetsTrade and other receivables from exchange transactions 3 397 892 3 397 892Cash and cash equivalents 92 038 668 92 038 668

95 436 560 95 436 560

Financial liabilitiesTrade and other payables from exchange transactions 36 809 618 36 809 618Taxes and transfers payable (non-exchange) 1 111 539 1 111 539Cash and cash equivalents (credit card) 297 099 297 099

38 218 256 38 218 256

2018Financial assetsTrade and other receivables from exchange transactions 2 150 318 2 150 318Cash and cash equivalents 92 166 863 92 166 863

94 317 181 94 317 181

Financial liabilitiesTrade and other payables from exchange transactions 32 415 199 32 415 199Taxes and transfers payable (non-exchange) 112 914 112 914Bank overdraft 140 539 140 539

32 668 652 32 668 652



128Department:




31. Risk management

Liquidity risk

The entity’s risk to liquidity is a result of the funds available to cover future commitments. The entity manages liquidity

risk through an ongoing review of future commitments and credit facilities.

Credit risk

Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. The

entity only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-

party.

Trade receivables comprise a widespread customer base. Management evaluated credit risk relating to customers on an

ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating,

risk control assesses the credit quality of the customer, taking into account its financial position, past experience and

other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board.

The utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash or using major credit

cards. Credit guarantee insurance is purchased when deemed appropriate.

32. New standards and interpretations

32.1 Standards and interpretations effective and adopted in the current year

In the current year, the entity has adopted the following standards and interpretations that are effective for the current

financial year and that are relevant to its operations:

GRAP 16 (as amended 2016): Investment Property

Amendments to the Standard of GRAP on Investment Property resulted from editorial changes to the original text and

inconsistencies in measurement requirements in GRAP 23 and other asset-related Standards of GRAP in relation to the

treatment of transaction costs. Other changes resulted from changes made to IAS 40 on Investment Property (IAS 40) as

a result of the IASB’s amendments on Annual Improvements to IFRSs 2011 – 2013 Cycle issued in December 2013.

The effective date of the amendment is for years beginning on or after 01 April 2018.

The entity has adopted the amendment for the first time in the 2018/2019 consolidated annual financial statements. The

impact of the amendment is not material.

GRAP 17 (as amended 2016): Property, Plant and Equipment

Amendments to the Standard of GRAP on Property, Plant and Equipment resulted from editorial changes to the original

text and inconsistencies in measurement requirements in GRAP 23 and other asset-related Standards of GRAP in relation

to the treatment of transaction costs. Other changes resulted from changes made to IPSAS 17 on Property, Plant and

Equipment (IPSAS 17) as a result of the IPSASB’s Improvements to IPSASs 2014 issued in January 2015 and Improvements

to IPSASs 2015 issued in March 2016.


The entity has adopted the amendment for the first time in the 2018/2019 consolidated annual financial statements.

GRAP 21 (as amended 2016): Impairment of non-cash-generating assets

Amendments to the Standard of GRAP on Impairment of Non-cash Generating Assets resulted from changes made to

IPSAS 21 on Impairment of Non-Cash-Generating Assets (IPSAS 21) as a result of the IPSASB’s Impairment of Revalued

Assets issued in March 2016.




129



32. New standards and interpretations (continued)



GRAP 31 (as amended 2016): Intangible Assets

Amendments to the Standard of GRAP on Intangible Assets resulted from inconsistencies in measurement requirements

in GRAP 23 and other asset-related Standards of GRAP in relation to the treatment of transaction costs. Other changes

resulted from changes made to IPSAS 31 on Intangible Assets (IPSAS 31) as a result of the IPSASB’s Improvements to

IPSASs 2014 issued in January 2015.




Directive 12: The Selection of an Appropriate Reporting Framework by Public Entities

The purpose of this Directive is to prescribe the criteria to be applied by public entities in selecting and applying an

appropriate reporting framework.

The effective date of the directive is for years beginning on or after 01 April 2018.

The entity has adopted the directive for the first time in the 2018/2019 consolidated annual financial statements. The

impact of the directive is not material.

32.2 Standards and interpretations issued, but not yet effective

The entity has not applied the following standards and interpretations, which have been published and are mandatory

for the entity’s accounting periods beginning on or after 01 April 2019 or later periods:

GRAP 104 (revised): Financial Instruments

Following the global financial crisis, a number of concerns were raised about the accounting for financial instruments.

This included that (a) information on credit losses and defaults on financial assets was received too late to enable proper

decision-making, (b) using fair value in certain instances was inappropriate, and (c) some of the existing accounting

requirements were seen as too rules based. As a result, the International Accounting Standards Board® amended its

existing Standards to deal with these issues. The IASB issued IFRS® Standard on Financial Instruments (IFRS 9) in 2009 to

address many of the concerns raised. Revisions were also made to IAS® on Financial Instruments: Presentation and the

IFRS Standard® on Financial Instruments: Disclosures. The IPSASB issued revised International Public Sector Accounting

Standards in June 2018 so as to align them with the equivalent IFRS Standards.

The revisions better align the Standards of GRAP with recent international developments. The amendments result in

better information available to make decisions about financial assets and their recoverability, and more transparent

information on financial liabilities.

The most significant changes to the Standard affect:

• Financial guarantee contracts issued

• Loan commitments issued

• Classification of financial assets

• Amortised cost of financial assets

• Impairment of financial assets

• Disclosures



130Department:


32.2 Standards and interpretations issued, but not yet effective (continued)

The effective date of the amendment is not yet set by the Minister of Finance.

The entity expects to adopt the amendment for the first time when the Minister sets the effective date for the amendment.

The impact of this standard is currently being assessed.

Guideline: Guideline on the Application of Materiality to Financial Statements

The objective of this guideline: The objective of this Guideline is to provide guidance that will assist entities to apply

the concept of materiality when preparing financial statements in accordance with Standards of GRAP. This Guideline

aims to assist entities in achieving the overall financial reporting objective. This Guideline outlines a process that may be

considered by entities when applying materiality to the preparation of financial statements. The process was developed

based on concepts outlined in Discussion Paper 9 on Materiality – Reducing Complexity and Improving Reporting,

while also clarifying existing principles from the Conceptual Framework for General Purpose Financial Reporting (“the

Conceptual Framework”) and other relevant Standards of GRAP. This Guideline includes examples and case studies to

illustrate how an entity may apply the principles in this Guideline, based on specific facts presented.

It covers: Definition and characteristics of materiality, Role of materiality in the financial statements, Identifying the users

of financial statements and their information needs, assessing whether information is material, applying materiality in

preparing the financial statements, and Appendixes with References to the Conceptual Framework for General Purpose

Financial Reporting & References to pronouncements used in the Guideline.

The effective date of the guideline is not yet set by the Minister of Finance.

The entity expects to adopt the guideline for the first time when the Minister sets the effective date for the guideline.

The adoption of this standard is not expected to impact on the results of the entity, but may result in more disclosure

than is currently provided in the consolidated annual financial statements.

GRAP 34: Separate Financial Statements

The objective of this Standard is to prescribe the accounting and disclosure requirements for investments in controlled

entities, joint ventures and associates when an entity prepares separate financial statements.

It furthermore covers Definitions, Preparation of separate financial statements, Disclosure, Transitional provisions and

Effective date.

The effective date of the standard is for years beginning on or after 01 April 2020.

The entity expects to adopt the standard for the first time in the 2020/2021 consolidated annual financial statements. It

is unlikely that the standard will have a material impact on the entity’s consolidated annual financial statements.

GRAP 35: Consolidated Financial Statements

The objective of this Standard is to establish principles for the presentation and preparation of consolidated financial

statements when an entity controls one or more other entities.




GRAP 38: Disclosure of Interests in Other Entities

The objective of this Standard is to require an entity to disclose information that enables users of its financial statements

to evaluate:





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32.2 Standards and interpretations issued, but not yet effective (continued)

the nature of, and risks associated with, its interests in controlled entities, unconsolidated controlled entities, joint

arrangements and associates, and structured entities that are not consolidated; and

the effects of those interests on its financial position, financial performance and cash flows.

It furthermore covers Definitions, Disclosing information about interests in other entities, Significant judgements and

assumptions, Investment entity status, Interests in controlled entities, Interests in joint arrangements and associates,

Interests in structured entities that are not consolidated, Non-qualitative ownership interests, Controlling interests

acquired with the intention of disposal, Transitional provisions and Effective date.




IGRAP 4 (revised): Applying the Probability Test on Initial Recognition of Revenue

The amendments to this Interpretation of the Standard of GRAP clarifies that the entity should also consider other factors

in assessing the probability of future economic benefits or service potential to the entity. Entities are also uncertain

of the extent to which factors, other than the uncertainty about the collectability of revenue, should be considered

when determining the probability of the inflow of future economic benefits or service potential on initial recognition of

revenue. For example, in providing certain goods or services, or when charging non-exchange revenue, the amount of

revenue charged may be reduced or otherwise modified under certain circumstances. These circumstances include, for

example, where the entity grants early settlement discounts, rebates or similar reductions based on the satisfaction of

certain criteria, or as a result of adjustments to revenue already recognised following the outcome of any review, appeal

or objection process.

The consensus is that on initial recognition of revenue, an entity considers the revenue it is entitled to, following its

obligation to collect all revenue due to it in terms of legislation or similar means. In addition, an entity considers other

factors that will impact the probable inflow of future economic benefits or service potential, based on past experience

and current facts and circumstances that exist on initial recognition.

An entity applies judgement based on past experience and current facts and circumstances. The effective date of the

amendment is for years beginning on or after 01 April 2020.

The entity expects to adopt the interpretation for the first time in the 2020/2021 consolidated annual financial statements.

It is unlikely that the standard will have a material impact on the entity’s consolidated annual financial statements.

GRAP 6 (as revised 2010): Consolidated and Separate Financial Statements

The definition of ‘minority interest’ has been amended to ‘non-controlling interest’, and paragraph .60 was added by the

Improvements to the Standards of GRAP issued in November 2010. If an entity elects to apply these amendments earlier,

it shall disclose this fact.

Paragraph .59 was amended by Improvements to the Standards of GRAP issued in November 2010. An entity shall apply

these amendments prospectively for annual financial periods beginning on or after the effective date [in conjunction

with the effective date to be determined by the Minister of Finance for GRAP 105, 106 and 107] from the date at which it

first applied the Standard of GRAP on Non-current Assets Held for Sale and Discontinued Operations. If an entity elects

to apply these amendments earlier, it shall disclose this fact.



132Department:



The Standards of GRAP on Transfer of Functions Between Entities Under Common Control, Transfer of Functions Between

Entities Not Under Common Control and Mergers amended paragraphs .03, .39, .47 to .50 and added paragraphs .51

to .58 and .61 to .62. An entity shall apply these amendments when it applies the Standards of GRAP on Transfer of

Functions Between Entities Under Common Control, Transfer of Functions Between Entities Not Under Common Control

and Mergers.


The entity expects to adopt the amendment for the first time in the 2019/2020 consolidated annual financial statements.

It is unlikely that the amendment will have a material impact on the entity’s consolidated annual financial statements.

GRAP 7 (as revised 2010): Investments in Associates

Paragraphs .03 and .42 were amended by the Improvements to the Standards of GRAP issued in November 2010. If an

entity elects to apply these amendments earlier, it shall disclose this fact.

The Standards of GRAP on Transfer of Functions Between Entities Under Common Control, Transfer of Functions

BetweenEntities Not Under Common Control and Mergers amended paragraphs .22, .28 and .38 and added paragraph

.24. An entity shall apply these amendments and addition when it applies the Standards of GRAP on Transfer of Functions

Between Entities Under Common Control, Transfer of Functions Between Entities Not Under Common Control and

Mergers.



is unlikely that the amendment will have a material impact on the entity’s consolidated annual financial statements.

Directive 7 (revised): The Application of Deemed Cost

This Directive was originally issued by the Accounting Standards Board (the Board) in December 2009. Since then, it has

been amended by:

• Consequential amendments when the following Standards of GRAP were amended to clarify some of the principles:

• GRAP 105 Transfer of Functions Between Entities Under Common Control

• GRAP 107 Mergers

Consequential amendments arising from GRAP 110 Living and Non-living Resources issued in December 2017.

Consequential amendments arising from the following Standards of GRAP in May 2018:

• GRAP 34 Separate Financial Statements

• GRAP 35 Consolidated Financial Statements

• GRAP 36 Investments in Associates and Joint Ventures

• GRAP 37 Joint Arrangements

• GRAP 38 Disclosure of Interests in Other Entities

The effective date of this Directive coincides with the effective dates of the applicable Standards of GRAP, as determined

by the Minister of Finance. If an entity has assets that it previously could not recognise and/or measure in accordance

with the Standards of GRAP on their initial adoption on the transfer date or the merger date because information about

the acquisition cost of the assets was not available, an entity applies this Directive to those assets. The fair value of those

assets is determined at the date of adopting the Standards of GRAP on the transfer date or the merger date in accordance

with the Directive’s Appendix paragraph A3.

The effective date of this revised directive is for years beginning on or after 01 April 2019.





133




The entity expects to adopt the directive for the first time in the 2019/2020 consolidated annual financial statements. It


GRAP 18 (as amended 2016): Segment Reporting

Segments are identified by the way in which information is reported to management, both for purposes of assessing

performance and making decisions about how future resources will be allocated to the various activities undertaken

by the municipality. The major classifications of activities identified in budget documentation will usually reflect the

segments for which an entity reports information to management.

Segment information is either presented based on service or geographical segments. Service segments relate to a

distinguishable component of an entity that provides specific outputs or achieves particular operating objectives

that are in line with the municipality’s overall mission. Geographical segments relate to specific outputs generated, or

particular objectives achieved, by an entity within a particular region.

The subsequent amendments to the Standard of GRAP on Segment Reporting resulted from editorial and other changes

to the original text have been made to ensure consistency with other Standards of GRAP.

The most significant changes to the Standard are:

General improvements: An appendix with illustrative segment disclosures has been deleted from the Standard as the

National Treasury has issued complete examples as part of its implementation guidance.

The effective date of the standard is for years beginning on or after 01 April 2019

The entity expects to adopt the standard for the first time when the Minister sets the effective date for the standard.



GRAP 20: Related parties

The objective of this standard is to ensure that a reporting entity’s consolidated annual financial statements contain the

disclosures necessary to draw attention to the possibility that its financial position and surplus or deficit may have been

affected by the existence of related parties and by transactions and outstanding balances with such parties.

An entity that prepares and presents financial statements under the accrual basis of accounting (in this standard referred

to as the reporting entity) shall apply this standard in:

• identifying related party relationships and transactions;

• identifying outstanding balances, including commitments, between an entity and its related parties;

• identifying the circumstances in which disclosure of the items in (a) and (b) is required; and

• determining the disclosures to be made about those items.

This standard requires disclosure of related party relationships, transactions and outstanding balances, including

commitments, in the consolidated and separate financial statements of the reporting entity in accordance with the

Standard of GRAP on Consolidated and Separate Financial Statements. This standard also applies to individual

consolidated annual financial statements.

Disclosure of related party transactions, outstanding balances, including commitments, and relationships with related

parties may affect users’ assessments of the financial position and performance of the reporting entity and its ability

to deliver agreed services, including assessments of the risks and opportunities facing the entity. This disclosure also

ensures that the reporting entity is transparent about its dealings with related parties.



134Department:



FOR THE YEAR ENDED 31 MARCH 201932. New standards and interpretations (continued)

The standard states that a related party is a person or an entity with the ability to control or jointly control the other party,

or exercise significant influence over the other party, or vice versa, or an entity that is subject to common control, or joint

control. As a minimum, the following are regarded as related parties of the reporting entity:

A person or a close member of that person’s family is related to the reporting entity if that person:

• has control or joint control over the reporting entity;

• has significant influence over the reporting entity;

• is a member of the management of the entity or its controlling entity.

An entity is related to the reporting entity if any of the following conditions apply:

• the entity is a member of the same economic entity (which means that each controlling entity, controlled entity

and fellow controlled entity is related to the others);

• one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of an

economic entity of which the other entity is a member);

• both entities are joint ventures of the same third party;

• one entity is a joint venture of a third entity and the other entity is an associate of the third entity;

• the entity is a post-employment benefit plan for the benefit of employees of either the entity or an entity related to

the entity. If the reporting entity is itself such a plan, the sponsoring employers are related to the entity;

• the entity is controlled or jointly controlled by a person identified in (a); and

• a person identified in (a)(i) has significant influence over that entity or is a member of the management of that

entity (or its controlling entity).

The standard furthermore states that related party transaction is a transfer of resources, services or obligations between

the reporting entity and a related party, regardless of whether a price is charged.

The standard elaborates on the definitions and identification of:

• Close member of the family of a person;

• Management;

• Related parties;

• Remuneration; and

• Significant influence

The standard sets out the requirements, inter alia, for the disclosure of:

• Control;

• Related party transactions; and

• Remuneration of management


The entity expects to adopt the standard for the first time in the 2020/2020 consolidated annual financial statements.



GRAP 108: Statutory Receivables

The objective of this Standard is: to prescribe accounting requirements for the recognition, measurement, presentation

and disclosure of statutory receivables.

It furthermore covers: Definitions, recognition, derecognition, measurement, presentation and disclosure, transitional

provisions, as well as the effective date.



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FOR THE YEAR ENDED 31 MARCH 201932. New standards and interpretations (continued)

The effective date of the standard is not yet set by the Minister of Finance.

The entity expects to adopt the standard for the first time when the Minister sets the effective date for the standard.




136Department:


NOTES

PR262/2019

ISBN: 978-0-621-47616-3

www.kzngbb.org.za

ANNUAL 2018/2019 REPORT - provincialgovernment.co.za · The KwaZulu-Natal Gaming and Betting Board...

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