Fincorp Annual

Transcription

Fincorp Annual

SWAZILAND DEVELOPMENT FINANCE
CORPORATION LIMITED
CORPORATION LIMITED
CONTENTS
Page
Vision, Mission, Purpose
2
Portraits of Their Majesties
3
The Board of Directors
4
Milestone events over the 10 year period
5-6
Message from Minister of Finance
7
Message from Tibiyo TakaNgwane
8
Chairman’s Report
9 - 10
Managing Director’s Statement
11 - 14
Microfinance as an Imperative Strategy in Order to Reach the Millenium Development Goals 15 - 16
Special Tribute from the USA Consultant who set up the Corporation
17 - 19
10 Years of Loyal Customer Service and Empowerment
20 - 23
Operations - General Business Finance
24 - 26
Operations - Agricultural Finance
27 - 29
Microservices
30 - 31
Administration
32 - 35
Blending Business with Culture
36 - 37
Annual Financial Statements
38 - 80
Annual Financial Statements Graphs
81 - 82
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SWAZILAND DEVELOPMENT FINANCE CORPORATION
CORPORATION LIMITED
CORPORATION LIMITED
VISION, MISSION, PURPOSE
VISION
To be recognized and acknowledged
by our stakeholders nationally and internationally as the foremost
business development institution providing financial services.
MISSION
To sustainably provide increased access to financial
services for Swazi entrepreneurs.
His Majesty King Nswati III
STATEMENT OF PURPOSE
To economically empower Swazi entrepreneurs through the
provision of accessible and sustainable financial services.
Her Majesty the Indlovukazi
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CORPORATION LIMITED
CORPORATION LIMITED
MILESTONE EVENTS OVER THE 10 YEAR PERIOD
MINISTER OF FINANCE
1993 At the opening of the Bhunu
Mall in Manzini His Majesty
King Mswati III for the first time
announced the intended
formation of a fund to assist
small enterprises in Swaziland
1995 His Majesty King Mswati III
launched the organization at
Ezulwini Royal Swazi Sun
Convention Center with a capital
base of E44 Million and named
the organisation Enterprise Fund
under legal notice No: 150/1995.
HON. MINISTER
MAJOZI SITHOLE
THE BOARD OF DIRECTORS
1996 Enterprise Fund officially opened
its doors to the public on 1 April
1996.
Mr. Almon Mbingo
Chairman
Mr. Musa Mdluli
Dr. Vincent M. Mhlanga (MD)
Mr. Mduduzi Zwane
Mr. Leonard Sithebe
Mrs. Nomsa Ntibane
Minister of Finance L.C. Von
Wissel announced the
appointment of the first Chief
Executive Officer Dr. Vincent
M. Mhlanga
1997 The Taiwanese Government,
which contributed much of the
seed capital for the organization
seconded a Business Advisor,
Mr. James Lee, for a two year
period.
1998 The British Government through
the Department for International
Development (DFID) solidified
its institutional support for The
Enterprise Fund by seconding
the first Technical Advisor, Mr.
John Berry, on a short term
contract.
1999 DFID appoints a new Technical
advisor, Mr. Keith Reed, for a
period of three years.
2000 Enterprise Fund honoured with
an appointment of its Chief
Executive Officer, Dr. Vincent
Mhlanga, to serve in the Board
of the World Association of
Small and Medium Enterprises
(WASME).
First Board Committee
2001 Minister of Finance, re-appointed
all Board of Directors for another
three year term.
2002 Minister of Finance approved
the conversion of the modus
operandi to encompass
individual lending alongside the
original group lending
methodology.
Janes Lee - Advisor
2003 Organization transformed from
being a Trust to be a Company
and changed its name from
Enterprise Trust Fund (ETF) to
Swaziland Development Finance
Corporation (FINCORP).
John Berry - Advisor
FINCORP commenced
individual lending.
FINCORP’s Managing Director,
Dr. Vincent Mhlanga, bestowed
by His Majesty King Mswati III
with a medal of the Order of the
Swazi Crown for his contribution
to the economic development of
Swaziland.
Opec Fund Alfred Helm with MD
Mr. Musa Sibandze
Mr. Mandla Mavuso
Mr. Simanga Simelane
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CORPORATION LIMITED
BOARD
MILESTONE
OF DIRECTOR
EVENTS OVER THE 10 YEAR PERIOD (cont.)
SPECIAL MESSAGE FROM HONOURABLE MINISTER OF FINANCE
2004 FINCORP concludes a E75
Million Line of Credit with
African Development Bank
(ADB).
FINCORP received a Euro
Market Research Centre Award
of Excellence.
European Market Research Centre
2004 & 2005 Awards
CORPORATION LIMITED
FINCORP moves into much
bigger offices at Dlanubeka
Building 7th Floor.
2006 FINCORP’s loan portfolio
reaches a record high E200
Million mark.
FINCORP concludes a USD$3
Million (E20 Million) Line of
Credit with OPEC Fund.
2005 FINCORP received a Euro
Market Research Centre Award
for making a meaningful
contribution to the development
of SMEs in Swaziland.
Four FINCORP staff members
successfully completed their
MBA programmes to bring the
number of FINCORP supported
study MBA holders to seven (7)
since inception. One other staff
member completed his ACCA
to bring the number of Chartered
Accountants within the
organisation to three (3).
It is my pleasure and singular honour
to take this opportunity to congratulate
the Board, Management, Staff and
Clients on the tenth anniversary of the
Corporation (FINCORP). I have over
the past years enjoyed a results oriented
and good working relationship with the
Board and Management of this dynamic
SME financing organization. There is
no doubt that FINCORP has excelled
in achieving its initial set goals of
empowering Swazi citizens through the
provision of accessible and sustainable
financial services. From humble
beginnings in 1996 with a capital base
of E44 Million, the organization has
grown to hold an asset base in excess
of E200 Million.
Harnessing the spirit of private
enterprise is essential to raising living
standards of the Swazi people and lift
them out poverty. Poverty remains one
of the major challenges facing the
Kingdom of Swaziland. Enterprise
development programs are therefore at
the top of Government’s national fiscal
interventions. FINCORP is one of the
most important organs created by His
Majesty’s Government to promote an
entrepreneurial spirit, create jobs and
ultimately reduce poverty levels.
Among the key founding principles of
FINCORP was rural outreach where the
poverty scourge is most prevalent.
MD receiving European Market Research Center Award of excellence in Brussels – Belgium
To compliment the efforts of enterprise
promotion, His Majesty’s Government
commissined the E1.6 Billion Job
Creation Summit in July 2005. Parallel
to the launch of the fund was the
formation of Maswati Foundation where
Government injected E30 Million. I
am pleased to note that FINCORP has
been one of the leading organizations
that took the E1,6 Billion initiative
seriously. To this end the Corporation
has disbursed loans exceeding E80
Million under the Job Creation Fund
and more than 2 000 Swazis benefited.
Hon. Majozi Sithole
Minister of Finance
As a parent Ministry of FINCORP, we
are mindful of the urgent need to
decentralize their operations in order to
increase rural outreach and impact.
We shall continue to explore ways and
means of ensuring that in line with the
National Decentralisation Policy (NDP),
FINCORP’s operations are
decentralized.
In conclusion and on behalf of His
Majesty’s Government, we would like
to congratulate FINCORP and its
stakeholders for attaining ten years of
loyal customer service. The giant
footprints that the Corporation has made
over the last decade will for ever be
cherished.
Hon. Majozi Sithole
Minister of Finance
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Minister of Finance with
Fincorp’s Clients
CORPORATION LIMITED
CORPORATION LIMITED
BOARDMESSAGE
OF DIRECTOR
FROM THE MANAGING DIRECTOR OF TIBIYO TAKANGWANE
Ndumiso Mamba
Managing Director
In 1993 when His Majesty King Mswati
III officially opened the Bhunu Mall in
Manzini, he announced the intended
formation of a fund that would assist
small enterprises and mandated Tibiyo
Taka-Ngwane to undertake a feasibility
study of such an initiative. In response
to the Royal command, the Managing
Director of Tibiyo TakaNgwane formed
a task team made up of various civil
society stakeholders to undertake the
task. They later convened at the then
Protea Hotel to deliberate on the
formation of the new fund.
The rest is history as the commendable
work of the task team led to the official
launch in November 1995 of the
Enterprise Trust Fund now known as
Corporation (FINCORP). To show its
commitment and appreciation to His
Majesty King Mswati III and the nation
at large, Tibiyo Taka-Ngwane topped
up the E36 Million contributed by the
Taiwanese Government by E8 Million
bringing the total seed capital of the
fund to E44 Million.
Staff and customers for the good work
of the Corporation over the last decade.
As shareholders of this fast growing
institution we are pleased to note the
positive impact that it has made in
developing the small business sector in
the country. FINCORP is undoubtedly
one of the leading and accessible SME
financing organizations locally.
In line with the objectives of Tibiyo
TakaNgwane which are to complement
government in fostering economic
independence and self sufficiency;
increase incomes in the hands of Swazi
citizens; and develop rural communities,
we shall continue to explore ways and
means of strengthening the institutional
capacity of FINCORP in order to enable
the institution to efficiently and
effectively deal with the diverse needs
of local SMEs.
Mr. Ndumiso C. Mamba
Managing Director
On behalf of Tibiyo TakaNgwane and
on the occasion of the tenth anniversary
of FINCORP, we join the nation in
congratulating the Board, Management,
CHAIRMAN’S REPORT
Corporation Limited (Fincorp) has come
a long way from its formative years in
the late 1990’s, then known as The
Enterprise Trust Fund, when it had an
asset base of E44 Million. To date, the
asset base has increased almost fivefold to E214 million, and in the process
Fincorp continues to make an immense
contribution to the development of the
Swazi Small and Medium Enterprises
(SMEs).
The lack of foreign direct investment
in Swaziland and the increase in the
level of dis-investment of large
companies has underscored the
importance of development finance
institutions like Fincorp, as SMEs have
become an integral part of economic
development. The other significance of
SMEs is, unlike multinational
companies, they are unlikely to leave
the country for greener pastures as a
result of changes or improvements in
other neighbouring economies. It is
encouraging to note that the Government
has created policies that are aimed at
promoting the development of local
SME’s. Of great significance is the
completion of the SME Policy and
setting up of the SWEEP initiative.
Overview
The past year saw an increase in the
country’s inflation rate; largely driven
by the increase in fuel price and the high
level of indebtedness in the country due
to the historically low interest rates
experienced. On balance the higher
rates of inflation offset any potentially
positive effects of a lower interest rate
environment for SMEs. Another area
impacting significantly on our business
has been the relative strength of the
Lilangeni against the currencies of our
major trading partners i.e the Euro and
US Dollar. This has resulted in the
reduction of proceeds paid to our sugar
cane farmers thus straining the ability
of borrowers to meet all loan repayment
obligations as and when they fall due.
This development is largely responsible
for the significant impairment of loans
and advances amounting to E11.9
million (2005: E9.4 million) as reported
in our financial statements. However
the local currency has been forecasted
to weaken over the coming year, thus
promising much needed relief to the
industry. Fincorp will continue pursuing
its policy of diversifying its loan book
to ensure that impacts of exogenous
shocks are mitigated. It still remains our
priority to bring financial services closer
to the Swazis living in rural areas; and
it is our fervent hope that the relevant
stakeholders will assist the organisation
realise this dream.
Almon Mbingo
Board Chairman
Financial Results
The Gross income increased by 52%
from E21million to E32 million during
the year under review. This was largely
driven by the increase in the gross loan
portfolio from E126 milion to
E221million. Operating expenses
increased by 21.5% to E12 million,
mainly due to an increase in personnel
costs arising directly from the
engagement of nineteen new staff
members, the net foreign exchange loss
on the Opec Fund Loan, and the move
to new and larger offices necessitated
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Baby Vegetable project for export
purposes at Kabhekukosi
CORPORATION LIMITED
CORPORATION LIMITED
BOARD
CHAIRMAN’S
OF DIRECTOR
REPORT (cont.)
MANAGING DIRECTOR’S STATEMENT
by the growth in business. The net
income after taxes almost trebled from
E0.69million to E2.75million.
His Majesty King Mswati III during a visit
at Vuka Sidwashini Farmers Association
All of this growth would not have been
possible without the trust of the
following financial institutions: African
Development Bank, The Opec Fund for
International Development, the
Government of Swaziland, The
Swaziland National Provident Fund, the
Central Bank of Swaziland, and TibiyoTakaNgwane, which collectively
granted us loans equalling E95.076
million. Their continued support is
much appreciated.
Outlook
Farmer receiving Sugar Cane Certificate
from Hon. Prime Minister A.T Dlamini
Former Chairman, Leonard Sithebe,
speaking at a Corporate Governance
Training Workshop
Developments with regard to ongoing
plans to abolish preferential prices on
all sales of sugar to the European Union
are being monitored closely, although
indications from the Swaziland Sugar
Association are that prices in the short
to medium term are expected to stabilise
at E1350 per tonne. Regardless of this,
Fincorp has in the interim decided not
to issue any new loans to this sector.
Stable sugar prices should improve the
profitability of Fincorp.
The high expectation created by the
E1.6 Billion Initiative is expected to put
more pressure on our business as more
Swazi SMEs expect to be funded for
their projects, even though they lack the
collateral required by formal financial
institutions. Cash injection by the
shareholders in the form of equity
contribution would be most welcome
in order to alleviate the organisation’s
liquidity constraint.
Corporate Governance
Swaziland in General
Fincorp fully subscribes to the principles
of good corporate governance and has
in particular inculcated a culture of
“open door policy” to all its
stakeholders. This approach has
cascaded to all levels of the organisation,
hence Fincorp is renowned for being
accessible and receptive to all
stakeholders, especially our clients. We
fully embrace the King Code of
Corporate Governance and emphasise
business ethics, transparency, honesty
and enterprise wide risk management.
In order to ensure maximum compliance
to good governance, the Audit, Risk
and Finance Committee and a
Remuneration Committee are in place
and comprise of well-experienced nonexecutive Directors.
Sandwiched between the continental
economic power of South Africa and a
rapidly resurgent and growing
Mozambique, Swaziland feels the pinch
of regional competition. It was during
the mid 1980s when Swaziland enjoyed
periods of robust economic growth and
prosperity. Mozambique was suffering
from a devastating civil war, whilst
sanctions on apartheid South Africa
undermined its economic growth.
Swaziland was used as a springboard
by many of the multinational companies
to serve both the South African and
Mozambican markets. For a small
developing country, the rate of
industrialisation was phenomenal. This
happened at a cost of under-development
of the country’s SME sector.
Unemployment was at its lowest as
many in the labour market found jobs
within the formal sector.
Conclusion
My appreciation goes to the
Management and Staff for their
commitment, dedication and hard work.
Special tribute goes to our clients for
their contribution to the growth of
Fincorp.
I would also like to welcome the newly
appointed Members of the Board of
Directors and look forward to their
insight as Fincorp forges ahead with its
mission to provide increased access to
financial services to Swazi
Entrepreneurs.
Winds of change began to blow across
Southern Africa in the early and mid
1990s. The war in Mozambique ended
and the apartheid regime in South Africa
crumbled amid calls from the
international community to introduce
democracy. Swaziland suddenly was
not the ideal place for foreign investors.
South Africa had the state-of-the art
infrastructure that lowered production
and transportation costs significantly.
In the late 1990s, Swaziland witnessed
unprecedented closures and downsizing
of companies, citing marketing and
financial difficulties. A number of them
relocated to South Africa. En-masse
retrenchments ensued. The rate of
unemployment grew in tandem with
poverty levels.
Economic Outlook
While the world economy grew by 4.8%
in 2005, the local GDP was only able
to grow by 1.8% in the same period.
The unimpressive performance was as
a result of a plethora factors. These
included the poor performance of the
agricultural sector due to prolonged
drought in the region particularly in the
rural areas; slowdown in manufacturing
output; and changes in international
trade agreements affecting major exports
like sugar and textiles. These challenges
exacerbated the already acute problem
of high unemployment, income
inequality and poverty. The reduction
in manufacturing output was caused by
closure of major companies, and weaker
performance of the same sector was due
to the substantial real appreciation of
the Lilangeni against major currencies
like the US Dollar.
Vincent M. Mhlanga (PhD)
Managing Director
Annual inflation averaged 4.8% in 2005.
However by 31 March 2006 the figure
had increased to 5.2%, compared to
3.4% in March 2005. Fluctuation in
food prices caused by erratic weather
conditions, together with the increase
in crude oil prices, contributed to the
increase in inflation, although it was
mitigated by the strong Lilangeni
exchange rate against major currencies.
Mr Almon Mbingo
Board Chairman
Automobile trailer manufaturing
business - Luve
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CORPORATION LIMITED
CORPORATION LIMITED
BOARD
MANAGING
OF DIRECTOR
DIRECTOR’S STATEMENT (cont.)
The Advent of FINCORP
MD at the OPEC Fund in Vienna, Austria
during the signing ceremony of the loan
of E20 Million
MD receiving European Market Research
Center Award of excellence in Brussels
– Belgium
Former Chairman, Mr Leonard Sithebe
and MD, Dr Vincent Mhlanga, with OPEC
Fund oficiall Mr Alfred Helm
The Enterprise Trust Fund (ETF) was
launched by His Majesty, King Mswati
III in November 1995, specifically to
address the problem of unemployment
which manifests in extreme cases of
poverty in the rural areas where more
than 70% of the population is domiciled.
It first opened its doors to the public in
April 1996. Over the years ETF has
fulfilled its mandate of increasing access
to financial and support services through
provision of loans to intermediary
organizations such as legally registered
cooperatives and business associations.
Because of the inherent problems
associated with group or wholesale
lending, the Swaziland Government
corporatised ETF to form a privately
registered company, christened The
Corporation (FINCORP). The
Swaziland Government and Tibiyo Taka
Ngwane became the first shareholders
holding 70% and 30% respectively.
FINCORP is actively looking for one
or two international equity partners to
take over the bulk of Government’s
stake.
The main improvement in FINCORP’s
lending methodology is that it now
allows individuals (and a limited number
of groups) to borrow funds in their own
right. This has resulted in rapid increase
in the loan portfolio without any
sacrifice in the portfolio quality. It still
enjoys a 86% repayment rate, with the
loan portfolio at risk standing at about
10%. The liquidity constraint continues
MANAGING DIRECTOR’S STATEMENT (cont.)
to impact adversely on FINCORP’s
development strategies. The capital
base is being seriously reviewed as it is
not allowed by the Central Bank of
Swaziland to take deposits. Using its
balance sheet, and of course some help
from Government, FINCORP has been
able to raise sizeable loan facilities from
international organizations like the
Africa Development Bank, OPEC Fund
for International Development, and
NOSARD.
Financial Performance
Total turnover (interest income) was
E32.0 million as at 31.03.2006, an
increase of 52% from 2005 figure of
E21.1 million. This scenario is
positively correlated to the increase in
loans and advances portfolio, which
grew from E126.5 million in 2005 to
E221.4 million in 2006. This high
increase in our loan book is as a result
of the high demand of our products and
services.
Costs containment has always been the
major control mechanism of the
organisation, as it grew by 21.2% when
compared to 2005 figure. The
organisation has a tough battle though
to win over interest expenditure. There
is a curb on the interest chargeable to
our clients, but we have had to source
many of our funds from outside of the
country, which opens FINCORP to
foreign exchange rate risk and external
interest rate cycle fluctuations.
Meanwhile, the Swaziland economy
and the southern African region are
currently in an upward interest rate trend.
Thus, FINCORP has to consider
borrowing locally, although it is a tall
order as potential financiers are investing
in South Africa, where returns are said
to be much higher. In addition, we have
very limited scope to pass on the
increased costs of borrowing to our
clients, in turn, putting further pressure
on our margins and threatening our
sustainability.
Our exposure to sugar cane loans has
had an adverse effect on our profit
margin. The strong Lilangeni to the US
Dollar has brought untold miseries to
our farmers who are battling to repay
their debts. The revised accounting
standard (International Accounting
Standard No.39) on provisioning
adversely contributed to the raising of
extra provisions in the accounts. Of the
E11.9 million impairment, E7.6 million
relates to sugar cane loans. Lending in
the sector is under scrutiny.
Nonetheless, we have posted a net profit
before tax of E3.7 million as opposed
to E0.989 million the previous year.
Accolades
The company’s performance has been
acknowledged nationally and
internationally by reputable individuals
and organizations. For instance in 2002,
the India based World Association for
Small and Medium Enterprises awarded
a prize to FINCORP and so did the
European Market Research Centre in
Brussels in April 2004 and December
2005. It is also gratifying to mention
that in September 2003, His Majesty
King Mswati III honoured the Managing
Director too in His Independence
Anniversary Honours.
Bird’s eye view of Microfinance
FINCORP has been recognized as the
flagship organisation for the
microfinance industry. This industry
holds tremendous potential to promote
the Swaziland economy from grassroots
by fostering young enterprises through
finance and skills development.
Microfinance can also improve the
livelihood of the lower income earners
by developing suitable and accessible
banking products and services. A major
plank in the Government’s job creation
platform is the energetic development
of microfinance as a means of widening
the employment-creating landscape.
Microfinance is among the best tools
available to-day to alleviate poverty.
The low income entrepreneurs do not
want charity. They do not lack energy,
work ethic, ideas, or entrepreneurial
spirit. What they lack though is access
to financial services, which includes
credit, savings, insurance, and money
transfers. These services can
significantly raise their standard of
living, and better equip them to manage
their lives. Bridging the massive gap
between microfinance demand and
supply is a steep challenge and it is only
by working together, that is Government
and other financial institutions, to
integrate sustainable microfinance into
the broader financial sector. It is only
then that meaningful progress will be
made. It is accepted that a multitude of
good and money making ideas do not
leave the starting blocks because nothing
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Textile business - Matsapha
Customers waiting to be served
Inspection winter maize crop
at Siphofaneni by the MD
CORPORATION LIMITED
BOARD
MANAGING
OF DIRECTOR
DIRECTOR’S STATEMENT (cont.)
CORPORATION LIMITED
MICROFINANCE AS AN IMPERATIVE STRATEGY IN ORDER TO REACH THE
MILLENIUM DEVELOPMENT GOALS (MDGs)
The fleet of 15 cars presented to each
of Mavela Farmers Association
members as dividends
happens without access to affordable
cash resources. It is true too that
everything falls apart where there is
inefficiency, and unskilled management.
Capacity building therefore forms an
integral part of microfinance. The
country should financially nurture and
mentor entrepreneurship and SMEs to
the point where they mature into strong
contributors to the economy through
sweat and financial encouragement.
New Staff Members
I warmly welcome to FINCORP’s
family all new staff-members.
The undersigned is heavily indebted to
the Board, Management and staff for
their support and input. I am humbled
to convey my sincere gratitude to our
valued clients for their unwavering
support.
Managing Director
Microfinance as an imperative
strategy in order to reach the
Millenium Development Goals
(MDGs)
Lower income earners or poor people
constitute the majority of the population
in most developing countries,
particularly Sub-Saharan Africa.
Regrettably an overwhelming number
still lack access to basic financial
services.
In many countries
microfinance is then seen as a marginal
sector, and primarily a development
concern for donors, governments, and
socially-responsible investors. In order
to achieve its full potential of reaching
a large number of the poor, microfinance
should become an integral part of the
financial sector.
Microfinance, unlike microcredit which
involves the provision of only loans,
includes other financial services besides
loan facilities, like savings, money
transfers, insurance and micro-pension.
Chief Mlamlela member of Mavela Farmers Association admiring his dividend in the form of a car bought by
the Association for each member of the Association comprising of Fifteen (15) members
Microfinance and its impact, go beyond
the provision of business loans. The
poor use financial services not only for
business investment in their micro
enterprises but also to invest in health
and education, to manage household
emergencies, and to meet the wide
variety of other cash needs. There is
empirical evidence from millions of
microfinance clients around the globe
that demonstrates that access to financial
services enables poor people,
particularly those in the rural areas, to
increase their household incomes, build
their asset base, and reduce their
vulnerability to the crises that are so
much a part of their daily lives. Access
to financial services also translates into
better nutrition and improved health.
It encourages and allows poor people
to plan for their future and more
importantly send their children to school.
Microfinance has made female clients
more confident and assertive, thereby
improving their position to confront
gender inequities.
Microfinance clients are able to manage
their cashflows and apply them to their
household priorities, which they judge
most important for their own welfare.
It can therefore be construed as an
especially participatory and nonpaternalistic development input. Access
to convenient, affordable and flexible
financial services empowers and equips
the lower income earners to make their
own choices and build their way out of
poverty in a sustained and selfdetermined way. Microfinance is
definitely unique among many
development interventions, in that, it
delivers social benefits on an ongoing,
permanent basis, and on a large scale.
Properly run and managed microfinance
institutions worldwide have
demonstrated that they can provide
financial services in a sustainable
manner and free of donor funding. It
therefore offers the potential for a selfpropelling cycle of sustainability and
massive growth, whilst providing a
powerful impact on the lives of the poor.
There is evidence that shows that, this
impact intensified the longer the
microfinance clients remains with a well
Poultry project - Ka-Bhekinkosi
Tent manufacturing business
- Mafutseni
Feedlot project - Dvokolwako
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CORPORATION LIMITED
BOARD OF
MICROFINANCE
DIRECTOR
AS AN IMPERATIVE STRATEGY IN ORDER TO REACH THE
CORPORATION LIMITED
SPECIAL TRIBUTE FROM THE USA CONSULTANT WHO SET UP THE CORPORATION
MILLENIUM DEVELOPMENT GOALS (MDGs) (cont.)
run microfinance institution, thus
deepening the power of this virtuous
cycle.
It is a sad truth though that poor people
in most of Sub-Saharan Africa have
virtually no access to formal financial
services. Their only informal
alternatives, such as family loans,
savings clubs, and moneylenders are
usually limited by amount, rigidly
administered, or available at quite
exorbitant interest rates. It is a great
challenge therefore to ensure that a
number of microfinance institutions like
FINCORP are established throughout
the world in order to provide the much
needed access to financial services for
the poor majority.
Managing Director
Special Tribute from the USA
Consultant who set up the
Corporation
Congratulations to the Board,
management, and staff of the Swaziland
Development Finance Corporation
(FINCORP) on its tenth anniversary of
diligently and professionally serving
the financial needs of Swaziland’s small
and medium sized enterprises (SMEs)
across all sectors of the economy. I also
extend my humble commendation to
His Majesty, King Mswati III, for his
vision in establishing the fund and
promoting the economic development
of Swazis.
To this day, I can remember the call
that I received from the Ministry of
Finance in February 1996, informing
me that the Government of Swaziland
had been given $10 million (E36.0
million) by the Republic of China for
SME development, and that His Majesty
had decided that the money should be
used to capitalise a fund, focused on
extension of credit to Swazi SMEs.
Later on Tibiyo TakaNgwane was asked
by His Majesty to augment the fund by
an additional E8 Million increasing
the amount to E44 Million. On the basis
of this simple concept, I was asked to
design and lead the implementation of
what then became the Enterprise Trust
Fund, which officially opened its doors
for business in April 1996.
Two early events in FINCORP’s life
still resonate today. In March 1996,
after I had drafted the detailed design
of the Fund’s organisational structure,
operational procedures, credit policies,
products, etc., the Board and the freshly
appointed CEO, Dr. Mhlanga, gathered
at Piggs Peak for the inaugural 3-day
strategic planning workshop. On the
advice of the Ministry of Finance and
with approval from His Majesty,
FINCORP’s first Board (technically
trustees, at the time) comprised a diverse
group of highly respected and
accomplished Swazi citizens. They
clearly approached their new
responsibilities with utmost proficiency
and seriousness, but they also expressed
doubts and fears. Empirical data and
the rumour mill alike were replete with
many stories of failed SME credit
programmes in Swaziland, inordinate
political interference in business
decisions, insurmountably negative
economic and social conditions, and a
host of other factors that seemed to give
FINCORP little, if any, chance of
success. Yet, the group’s zeal and
passion to set a new course, and the
camaraderie built in those early days
created a strong foundation on which
FINCORP still rests.
Dressmaking business - Manzini
16
17
Roland V. Pearson, Jr.1
CORPORATION LIMITED
BOARD
SPECIAL
OF DIRECTOR
TRIBUTE FROM THE USA CONSULTANT WHO SET UP THE CORPORATION (cont.)
zeal and passion to set a new course,
and the camaraderie built in those early
days created a strong foundation on
which FINCORP still rests.
Later in that first year of operation, in
my capacity as senior advisor to the
Fund, I observed one of the first Board
meetings, at which the group considered
the applications of various SMEs and
intermediaries. One application came
up on the agenda from an individual,
who apparently held considerable
political and social sway in the country.
Management had expressed doubt about
the viability of the business and the
prudence of extending a loan, but others
raised concerns that His Majesty may
call FINCORP to heel, if this application
were rejected. The debate, very ably
guided by the then-Chairman, Mr.
Leonard Sithebe, went round and round
among the trustees, exchanging a whole
variety of views in a lively mix of
SiSwati and English. In my typically
impatient and ‘American’ way of
thinking, I thought that they were
spending far too much time in coming
to a final decision on what, in my
professional and objective opinion, was
Computer Training business Engculwini
a clearly inferior business proposal.
After a period that seemed to span an
hour or more, a lone, but deep,
authoritative, and previously silent voice
arose from the end of the table. The
Indvuna Mlobokazana Fakudze, the
official representative of His Majesty
on the board of trustees, said (in
English), ‘His Majesty would not
approve of this person using his
connections to get this loan’. At that
moment, the Chairman asked for a vote,
and the application was unanimously
declined.
I smiled and breathed a sigh of relief.
In my more than 20 years in banking
and development finance, 15 of those
in Africa, I have yet to witness a more
thoroughly robust demonstration of good
corporate governance, and of the
complex nexus between vaunted
‘international standards’ and intricate
local realities.
MD and DMD conducting a lecture at
Vuka Sidwashini Farmers Association
CORPORATION LIMITED
SPECIAL TRIBUTE FROM THE USA CONSULTANT WHO SET UP THE CORPORATION (cont.)
FINCORP continues to face these
challenges on a daily basis. And many
of the same issues arose recently, during
another strategic planning workshop
that I had the pleasure of facilitating for
them. I have confidence that the new
plan will consolidate the lessons and
momentum of FINCORP’s first ten
years, and propel it to new levels of
sustainability and impact, not because
of my intervention, but because of the
sustained and palpable adherence to the
values and practices initiated by the first
group of key internal stakeholders.
I witnessed the same lively camaraderie
among the current board, management,
and staff. The CEO still drives a highly
loyal staff to work long hours, and to
‘hit the road’, and ‘look them in the eye’
to ensure good appraisal and tight
management of the portfolio. The
organisation has developed a ‘thick skin’
to withstand persistent pressures to take
decisions that may seem politically
correct, but financially and economically
detrimental.
In closing, I wish FINCORP continued
strength and success, and sincerely
express my gratitude for the privilege
of having been associated with you over
the past ten years. You remain as a
beacon of hope and standard of integrity
and professionalism in Swaziland and
internationally.
Pre-school business - Manzini
Mr. Roland V. Pearson, Jr.
Siana Strategic Advisors
Pre-school business - Manzini
His Majesty King Mswati III getting a brief from Chairman, Elias Ndzimandze, during a visit at Mavela Farmers Association
18
19
CORPORATION LIMITED
BOARD10OF
YEARS
DIRECTOR
OF LOYAL CUSTOMER SERVICE AND EMPOWERMENT
10 years of Loyal Customer Service
and Empowerment
Wood carving - Malindza
Wood carving products - Malindza
Sugar cane haulage - Northern Hhohho
Way back in 1996 it was never
conceived that the Swaziland
Development Finance Corporation
(FINCORP) would expand to such
unprecedented scale and scope. Over
the last decade FINCORP has evolved
to become what could be conservatively
described as the “The lender of first
choice for micro, small and medium
entrepreneurs in Swaziland”. The brand
name has been elevated to inconceivable
levels in the market place. FINCORP
has experienced phenomenal growth
and demand for its services far
exceeding expectations and the initial
projected future growth. Swazi
empowerment, creation of wealth and
creation of jobs have been at the core
of FINCORP’s operational guiding
principles. Apparently empowerment is
an emotive issue in every jurisdiction
or nation. It is the responsibility of
every Nation and Government to
provide a climate conducive for self
employment and investment for the
prosperity of the general populace. This
is more so very important in developing
Nations like Swaziland, which is
engulfed by intense poverty levels, yet
it does not provide social security
measures often found in the well
developed world. Developing Countries
are in a desperate need for a huge new
trust of job creation from the private
sector and this is the only way there can
be a significant and lasting reduction in
poverty. In an effort to deal with the
innate social inequalities and the poverty
scourge, His Majesty King Mswati III,
officially promulgated the formation of
FINCORP in 1995 initially christened
The Enterprise Trust Fund. The
organisation first opened its doors to
the public in April 1996 and has over
the years offered its service in a diligent,
sustainable and enviable manner.
Operations
FINCORP has over the years undergone
various policy and operational changes,
with the main aim of matching the
rapidly changing demands of its large
target clientele. FINCORP was initially
a wholesale lending institution, but
introduced a retail lending window in
April 2003 in order to cater for potential
borrowers who did not belong to any of
the existing financial intermediaries.
Moreover, experience had shown that
there were very few credible and
sustainable financial intermediaries in
Swaziland and therefore a limited
market for wholesale lending and
meaningful outreach. In April 2003, and
subsequent to in-depth market research,
the institution broadened its loan product
base by introducing individual lending
along side its original wholesale lending
product. Apparently, it has always been
entrenched in FINCORP’s policies that
customer loyalty can only be best
maintained and sustained through
continued and concerted efforts to meet
customer needs as satisfactorily as
possible. FINCORP currently offers a
wide range of loan products including
general business loans, asset lease
finance, agribusiness, trade, services,
invoice financing and micro loans. Other
peripheral services include insurance,
CORPORATION LIMITED
10 YEARS OF LOYAL CUSTOMER SERVICE AND EMPOWERMENT (cont.)
transfers, mentoring, monitoring,
business counselling and commercial
linkages. Innovation is the nerve centre
guiding operations as we strive to
provide unique financing solutions that
are tailor made to meet the clients’
needs. We seek to accept and appraise
business propositions that are out of the
ordinary. FINCORP does not provide
the usual answers but strives on high
versatility and openness to change as a
continually learning organisation. Being
a relatively young organisation,
FINCORP has had considerable success
in reaching large numbers of Small and
Medium Enterprises (SMEs), whilst
maintaining both high repayment rates
and financial sustainability. In
cumulative terms the institution has, to
date, provided financial and nonfinancial support services valued at more
than E400 million (USD$ 60 Million)
to more than 15,000 clients.
at all levels of the organisation.
FINCORP subscribes to the notion that
you need an entrepreneurial oriented
officer to deal with the diverse needs of
the entrepreneurs. Harnessing and
mentoring the spirit of private enterprise
is essential in raising levels of efficiency
among entrepreneurs. An incentive
based scheme where individual officers
sign performance agreements which
clearly define deliverables and
performance benchmarks for each
position has been put in place. This
approach has been proven to be a
successful self managing mechanism
and promotes an entrepreneurial
management style among employees.
Just like an entrepreneur, an officer has
to deliver quality service to his clients
in the form of close loan monitoring
and reap premium rewards at the end
of the financial year. The same goes for
all employees in the other support
departments of the organisation.
Poultry business - Siphocosini
Loan Monitoring Systems
The Business Cycle
Monitoring of loan beneficiaries is at
the core of FINCORP’s daily operational
activities. More than fifty per cent of
the staff compliment comprise of
customer relationship officers who are
primarily responsible for visiting clients’
businesses on a daily basis to ensure
that FINCORP is at the top of the
priority list when it comes to the
creditors of each of our clients. The loan
tracking system is designed such that
each client is visited at least twice a
month by the Credit Officers. Senior
Management also conducts regular visits
to loan beneficiaries. An entrepreneurial
style of management has been inculcated
As an organisation formed against the
backdrop of a long standing history of
lack of access to credit by Swazi
entrepreneurs in the commercial banking
community, FINCORP places more
emphasis on cashflow and character
lending which entails insisting on a
complete business cycle before
considering any business proposal for
financial assistance. The proposal must
satisfy all the critical stages of a business
cycle namely idea generation,
implementation; marketing and reinvestment of profits for business
growth. Loan review and appraisal is
20
21
Clothing retail business - Mbabane
Butchery business - Malkerns
CORPORATION LIMITED
CORPORATION LIMITED
10 YEARS OF LOYAL CUSTOMER SERVICE AND EMPOWERMENT (cont.)
BOARD
10OF
YEARS
DIRECTOR
OF LOYAL CUSTOMER SERVICE AND EMPOWERMENT (cont.)
centred around ability to produce and
sell the product or service being offered.
Particular attention is paid to marketing
as it is strongly believed that cashflow
is “King” to a small and medium
enterprise and such cash flow can only
be achieved if loan beneficiaries are
able to sell their products without any
difficulties. Put in another form, the
project proposal must be technically
feasible and financially viable. A
healthy cashflow will only exist where
the entrepreneur secures the market
before starting a business operation.
Management Information System
The management information system
is an important functional element for
any organisation in the financial services
industry. An MIS should be supportive
of the institution’s longer term strategic
goals and objectives. Selecting the most
appropriate management information
system is critical as the information
generated by the system is an essential
component for prudent and reasonable
business decisions. In response to the
rapid growth and increase in product
lines, FINCORP solicited a high
powered fully fledged accounting
software from a global multinational
Mobil Sawmill - Mbabane
known as Craft Silicon. The software
itself is known as Micro Manager which
is a down scaled version of a widely
used banking software known as “Bank
2000”, and fully integrates both the
general ledger and loans module. The
MIS fully meets the present and future
requirements of the organisation and
generates user friendly reports
customised to meet internal information
requirements. The key feature of the
software is its ability to manage both
group and individual loans, thus being
squarely in line with the present diverse
operations of the organisation. Whilst
FINCORP is presently a credit
institution only, the MIS provides a
module for savings which is an area of
possible growth in the near future. The
system is also fully compliant with the
reporting requirements of internationally
acclaimed rating agencies such as Global
Credit Ratings and CGAP (Consultative
Group Agency for the Poor) as it easily
generates the international performance
indicators and other essential loan
monitoring reports. It is also a highly
versatile system in that new reporting
requirements can be met without any
major programming requirements to the
system. The performance of the MIS is
continually monitored to ensure good
Public Transport business - Mbabane
FINCORP Trade Fair stand
service to clients, efficiency in
operations and portfolio quality.
Best Practice
FINCORP is committed to international
best practice principles in managing its
operations. An organisation is only as
good as its administration system and
managerial capacity. Effective risk
management is an integral part of the
institution’s policies hence the
organisation is continually developing
and enhancing its risk management,
operational and control procedures in
order to maintain high sustainability
levels. In response to the emerging
global and knowledge economy,
investment in institutional capacity
building and the development of human
capital has over the years been made a
high priority for the organisation. Such
is clearly discernible in the profile of
the Executive Management of the
organisation. In addition employees are
encouraged and given incentives to take
private correspondence studies in order
to keep abreast with major changes in
the industry. FINCORP fully subscribes
to the principles of open door policy,
integrity and accountability in order to
effectively and efficiently offer its
services to Swazi entrepreneurs.
Conclusion
In conclusion the organisation is
anxiously looking forward to the
challenges of the next decade and will
continue to strive for the best customer
services and satisfaction.
Mr Dumisani J. Msibi
Deputy Managing Director
FINCORP Trade Fair Exhibition Stand
22
23
CORPORATION LIMITED
CORPORATION LIMITED
OPERATIONS – GENERAL BUSINESS FINANCE
OPERATIONS – GENERAL BUSINESS FINANCE
General Business Finance
Corrugated iron sheets manufacturing
business – Matsapha
The provision of access to credit services
to Swazi SME’s is the core function of
Fincorp and the department receives a
plethora of loan applications from
aspiring entrepreneurs throughout the
year. That business financing is the core
activity is clearly manifested in the staff
numbers deployed to mann the
department and the number of borrowers
under this section. Thirty one per cent
(31%) of the total staff compliment is
responsible for the day to day operations
of the general business section and to
ensure that the mandate of empowering
Swazi entrepreneurs is fulfilled.
Also falling under the general business
department is the micro loans section
which is a hive of activity through and
through. This sub department is manned
by a staff complement representing
fifteen per cent (15%) of the total
employees.
Overview of the Business Division
Owing to the diverse nature of business
propositions submitted by loan
applicants, effective and efficient loan
evaluation, appraisal and monitoring
systems are the cornerstone of daily
operations of the business section. One
of the major risk mitigation tools utilised
is that of identification of preferred
lending sectors. This automatically
eliminates those sectors perceived as
non sustainable, in particular those that
are overly saturated. Parallel to that is
the continued identification of those
sectors that have a huge growth potential
or are inadequately serviced in the
market place. This exercise is crucial
given the high level of copycat
syndrome in Swaziland. Multiple studies
conducted in Swaziland point to three
major challenges faced by the sector,
namely:
•
•
•
General lack of creativity and
innovation amongst SME’s
Lack of readily available market
intelligence which would enable
SME’s to target growth sectors.
Low standard of business among
SME’s.
Some sectors that manifest the rife copy
cat syndrome include: Public transport,
phone spaza, grocery or supermarket
outlets, stationery shops, sale of second
hand vehicles, and hair salons.
Meanwhile underserved sectors which
have a great potential to attain
profitability and sustainability levels
include: manufacturing with an
emphasis on import substitution, and
value adding processing such as meat
products like sausages.
Interest Rates
Interest rates are a key element of any
lending operation and FINCORP’s
interest rates are meticulously calculated
by taking into account primarily the cost
of funds, along with all the key other
variables. The following formula is used
in determining the rate charged to
client:IR = CF + OC + CR + LL - II
Where : IR- Interest Rate charged
CF- cost of funds
OC- operational Costs
CR- required capitalisation rate
LL- loan loss provision
II - Investment Income
Loan Processing Cycle
The loan processing cycle is the core
engine driving the effective and efficient
assessment of loan propositions
submitted by loan all applicants. The
various critical stages of the internal
processing cycle are defined below:
Initial Screening : The loan processing
cycle commences with a one on one
consultation between the loan applicant
and our credit officers(CO) who will
advise the client on whether the business
idea could be viable and if there exists
any prospects of the loan being
favourably considered. This also entails
a look at the client’s qualifications and
more importantly his character, business
expertise and level of commitment.
Depending on the size of the intended
business and the likelihood of having
the loan approved, the client may be
requested to prepare a business plan and
supporting documentation which may
include financial statements, bank
statements, lease agreement, company
registration documents, or market
confirmation letters.
Appraisal : Upon submission of all the
requested documentation, loan
application documents will be completed
by the applicant. Then the CO will
obtain the applicant’s credit profile from
ITC together with a reference from an
employer or other credible trading
partner. A visit to the business site, or
proposed site will be made to verify the
plan, especially the market.
Recommendation : From the appraisal
information the CO will then make a
recommendation to the Senior Credit
Officer by way of a resume which will
at a minimum have attachments such
as a cash-flow projection and the
documents obtained at the initial
screening stage. Further
recommendations will be made to the
Manager with the final
recommendations done at Credit
Committee stage (weekly), which
comprises the entire management team
at Fincorp. Loans can be rejected at any
stage before reaching the Credit
Committee.
Disbursement : Upon signing of
agreements or registration of all security
documents, disbursement can
commence. To mitigate the risk of abuse
of funds and to ensure that funds are
used for intended purpose,
24
25
Mobile sawmill business - Mbabane
Woodcity Franchise - Manzini
Woodcity Franchise - Manzini
CORPORATION LIMITED
CORPORATION LIMITED
OPERATIONS – GENERAL BUSINESS FINANCE (cont.)
disbursements are made direct to
suppliers of goods and services, save
for payments for working capital such
as salaries and other minute expenses.
Retail business - Manzini
Monitoring and Repayment : All
clients are furnished with a schedule of
repayments over the agreed repayment
period clearly showing the due dates
and amounts. It therefore immediately
becomes the responsibility of the
relevant Credit Officer to monitor the
client ensuring that loan repayments are
made as and when they fall due in a
timely manner. For every site visit or
payment follow up made, officers
complete a site visit / contact report for
record purposes.
OPERATIONS - AGRICULTURAL FINANCE
Counselling and Advice : The Credit
Officers also provide technical advice
where necessary. FINCORP Credit
Officers are encouraged to adopt a more
hands on and hand holding approach in
assisting clients in order to mitigate the
risk of business failure and ultimately
non loan repayment.
Conclusion
The Business Department is committed
to accepting exciting and viable projects
to finance as the impact of FINCORP’s
services will be judged by the extent to
which we contribute to the economic
empowerment of Swazi SME’s.
Butchery business - Malkerns
Agricultural Finance
FINCORP is one of the leading financial
institutions financing agricultural
business activities in Swaziland. Agribusiness has its deep cultural roots
among Swazi citizens and has over the
years evolved to be the backbone of the
country’s economic growth and major
foreign exchange earner. Economic
development in Swaziland continues to
be largely dependant on agriculture.
This is more so because land, especially
in rural areas, is good for farming and
the country enjoys multiple climatic
conditions throughout the year. Whilst
most financial institutions are not so
keen to finance rural farmers because
they do not hold legal title to the land,
FINCORP has profited by using that as
comparative advantage. After all, the
organisation was founded on the
principles of promoting non
collateralised lending.
FINCORP has financed a host of
agricultural projects which include sugar
cane, livestock, bee farming, maize,
vegetables, and other high value crops
such as baby vegetables. As at the end
of the financial year forty percent of the
total portfolio represents agri-business
loans.
performance and investment returns of
the sector were quite attractive.
As the years went by, the so called
Swazi Gold has faced serious price
reduction and costs escalation challenges
prompting the organisation to look for
other equally sustainable and high value
agricultural produce. One such major
high value farming activity that came
into the picture was baby vegetables.
To ensure that the produce of the farmers
have markets the organisation negotiated
and concluded a Memorandum of
Understanding with the National
Marketing Board (NAMBOARD) as a
guaranteed marketing channel.
Livestock farming has also been on the
rise during the past financial year. The
livestock projects currently financed
include piggery, beef, dairy, poultry and
lamb production. To this end and in an
effort to strengthen the viability of
livestock production, in particular beef
and dairy production, a memorandum
of understanding was concluded with
both Swaziland Meat Industries and the
Swaziland Dairy Board. This was to
ensure that the farmers have stable
markets to sell their produce.
Sugar cane farming - Lavumisa
Sugar cane haulage business – Mhlume
The Agricultural Projects
Tent manufactured by
Millennium Tent Makers - Mafutseni
Hon. Minister Lutfo Dlamini during the official opening at
Millennium Tent Makers - Mafutseni
Historically the institution had a high
exposure to one farming activity, namely
sugar cane farming. In the mid to late
nineties, sugar cane farming represented
more than seventy per cent (70%) of
the total loan portfolio. Of course the
Vegetable production business
– Siphofaneni
26
27
CORPORATION LIMITED
CORPORATION LIMITED
OPERATIONS - AGRICULTURAL FINANCE (cont.)
Vegatables farming project
Siphofaneni
Empirical evidence and past experiences
have shown that agri-business is likely
to succeed where there is a commercial
market for large quantities in place. Of
course this will only happen where the
other critical ingredients to make a farm
operation successful are in place. The
set up, structures and logistics of sugar
cane farming are one such perfect
example.
It is against this background that
FINCORP has made concerted efforts
to secure strategic alliances with major
marketing agencies such as
NAMBOARD, Swaziland Dairy Board,
National Maize Corporation and
Swaziland Meat Industries (SMI) and
will continue looking for other similar
smart partnership avenues.
THE SUGAR INDUSTRY
Introduction
Maize Bumper harvest
FINCORP is one of the main sugar cane
financing institutions in Swaziland,
especially among small to medium
farmers. Our clients are in the Middle
Veld (Malkerns and Sidvokodvo),
Lowveld (Siphofaneni – Lavumisa) and
Hhohho district, milling at Simunye and
Illovo sugar mills.
Feedlot Farming - Dvokolwako
The sugar sector is central to the
economy of Swaziland, accounting for
59% of agricultural output, 35% of
agricultural wage and about 18% of
national GDP. With Swaziland facing
high levels of poverty and
unemployment, the sector can make a
meaningful contribution to fighting these
OPERATIONS - AGRICULTURAL FINANCE (cont.)
problems. Sugar presents a good
opportunity for farmers to get
employment, raise incomes and move
out of poverty.
Challenges
Against the backdrop of a currency
appreciation, the industry is now faced
with an array of challenges, and is in a
period of uncertainty, as the situation
in its major export market, the European
Union, changes dramatically. The EU
is reforming its internal sugar cane
protocol, with a resultant drop in the
EU price thus affecting the guaranteed
preferential market.
Implication for Swaziland
There will be huge revenue losses for
the Swazi sugar industry. Initial rough
calculations put the revenue losses at
Euro 19 million (E 155 million) per
annum over the period 2006-2008 rising
to E260 million (USD $32 Million) in
2008/2009. That would represent a 25
% reduction in total annual revenues
for 2006-08 as compared to the current
level.
For financers like FINCORP, declining
Emalangeni earnings have increased
pressure for the renegotiation of the
financial packages extended to
smallholder sugarcane growers. It has
also brought fears about the ability of
the smallholder growers to repay their
loans, hence the decisions of either to
stop extending loans to new sugar
projects or radically revising the terms
of sugar sector loans.
FINCORP with all other key
stakeholders is committed in helping
the farmers meet the challenges that lie
ahead. The basic strategy is to improve
yields both in tonnage and sucrose
content per hectare at optimal cost and
without compromising production. The
energy cost as it also impacts adversely
to the industry is under scrutiny.
Beef/Feedlot Production
The Corporation has relentlessly
maintained its focus on supporting Small
and Medium Enterprises (SMEs) in
Swaziland in all sectors of the economy.
The past year has seen a resurgence of
the beef production industry in
Swaziland through feedlot farming and
FINCORP has been one of the major
financiers to feedlot farmers. The
Corporation has collaborated with the
Swaziland Meat Industries (SMI) in
supporting the farmers technically and
while ensuring that they gain access to
credit to pursue the livestock farming
activities.
The collaboration with SMI has
managed to elevate livestock farmers
from subsistence to commercial farmers.
This transition has managed to
successfully overturn the traditional
approach of keeping old aged animals,
which is a common practice amongst
Swazis. A majority of Swazi livestock
farmers have realized the value of
commercial feedlot farming and have
taken advantage of the opportunity.
Parallel to the livestock farming, another
business opportunity has emerged for
agents that solicit young aged cows to
supply the commercial feedlot farmers.
Dairy farming - Kwaluseni
Challenges faced by the feedlot farmers
include:
•
•
•
•
Increased recurrent costs such
as transport costs.
Marginal profits due to
inefficiency in stock feeding and
procurement of poor breeds.
Scarcity of good grade of animals
that will respond positively to
the feeding program.
Inadequate supply of good
animals within the local market
which results in importation of
livestock.
Dairy farming - Kwaluseni
Despite all these challenges the scheme
has performed satisfactorily and
attracted livestock farmers from all four
regions of the country.
Dairy farmer holding automated
milking equipment
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CORPORATION LIMITED
CORPORATION LIMITED
FINCORP MICROSERVICES
FINCORP MICROSERVICES (cont.)
Microservices
In pursuit of a strategic initiative adopted
in 2001 to diversify the sectoral
distribution of FINCORP’s loan
portfolio, the Corporation introduced a
micro loans product line which was
branded “Microservices”. This was after
intensive market research, conducted
by Micro Save Africa. Key revelations
of the market research were that if
FINCORP ignored financial domestic
needs for business loan clients, chances
were very high that an unauthorised
diversion of business funds would occur
resulting in business failure and non
loan repayment. This product is
primarily aimed at meeting life needs
for our business loanees who have
healthy business cashflows that can cater
for both their business loan and micro
loans installments. Furthermore the
service has been made available to
salaried employees of the civil service
and selected parastatals.
Uniqueness
House constructed in rural area
using a Microloan
FINCORP’s micro loans service is
unique in that whilst the Corporation is
committed to helping loan applicants
with funding, it is not in any way
attempting to overburden its clients with
insurmountable debts. Consequently
the client’s source of income must be
adequate enough to repay the micro loan
and still leave the applicant with enough
cash to defray other living expenses.
Credit Officers in the Microservices
department are guided by a framework
of qualifying criterion which places
more emphasis in the ability not only
to repay FINCORP’s loan but to also
be left with adequate resources to earn
a decent living.
The new product was introduced in
April 2003 as a pilot run but surprised
many with its exponential growth due
to very high demand. To this end there
are more than 8000 clients under the
Microservices department alone. Micro
loans account for thirty per cent (30%)
of the total loan portfolio and contribute
close to forty per cent (40%) of the
annual income. Having started with one
Credit Officer in 2003 it is unbelievable
that the department now employs six
qualified staff members and is
operationally semi-independent with
high sustainability levels. FINCORP’s
micro loans are relatively affordable
and flexible hence very much popular
to consumers.
Impact
A phenomenal number of Swazis have
improved their standard of living by
taking advantage of this service.
Borrowers use the loans to pay for their
children’s education, medical expenses,
rural housing, electrification of rural
homes and other emergencies. Some
even use the product to buy cars or take
a much refreshing holiday. Interestingly
we have seen a number of applicants
using the loan proceeds to start small
income generating activities because it
is considered hassle free and client
friendly.
It is FINCORP’s utmost objective to
reach a large number of Swazis with
the micro loans product in response to
the demand. To this end Fincorp is
considering making the microservices
department a fully independent brand
offering a variety of customer driven
products.
Process Analysis
Extensive analysis was done on the
operational design and process flow of
loan processing procedures in order to
achieve maximum efficiency, quick turn
around times and optimal customer
satisfaction. In designing the product,
risk mitigation was always at the
forefront. There is zero tolerance for
loss under the Microservices department.
A credit life assurance scheme is in
place for all clients. It is therefore not
surprising that in 2005 a South African
company, NAB Financial Services,
approached FINCORP to take over its
micro loans portfolio thus further
increasing the market share and scope.
Microservice Department team
30
31
CORPORATION LIMITED
CORPORATION LIMITED
ADMINISTRATION
Dumisani Msibi
Deputy MD
Phindile Dlamini
Credit Office
Queeneth Shabalala
Executive Secretary
ADMINISTRATION (cont.)
Human Resources
Departmental Functions
Human Resources Development and
staff welfare are considered to be the
nerve centre of FINCORP’s livelihood
and therefore a high priority in the
organisation’s Human Resource Policy.
The overall commitment of the
Corporation is to ensure professionalism
and excellence. Consequently it is of
paramount importance that the
organization continually equips its staff
members with the requisite skills in
order to effectively meet the diverse
customer needs. An oversight body,
namely the Remunerations Committee,
has been put in place and it comprises
of three non-executive Directors and
their function is to ensure the full
compliance to the Industrial Relations
Act, work ethics and to foster modern
Human Resource Management
practices. Ultimately, FINCORP would
like to attract and retain the best work
force available and to be the employer
of choice in the labour market.
The Personnel and Administration
department is primarily responsible for
recruitment, training and development,
more importantly the upkeep and
general welfare of the employees. As a
support function, the department’s scope
covers all personnel administration
responsibilities. The Corporation is
committed to making the working
environment of its employees an
enjoyable and rewarding experience by
providing them with all the required
tools of the trade.
Staff Training and Development
Human capital is the back-bone of the
Corporation’s existence; therefore
continuous staff training and
development are key elements in our
Corporate Strategy. Under the year of
review a number of staff members
attended various courses, workshops
and seminars as shown below:
NAME OF OFFICER & TITLE
COURSE DESCRIPTION
Nontokozo Shongwe
Micro Enterprise Development
Credit Officer
Sandile Mlambo
Micro Enterprise Development
Credit Officer
Dumisani Msibi
Management Innovation of
Deputy MD
Technology Transfer
Bonkhe Lukhele
Microfinance for the Africa region.
Credit Officer
Phindile Dlamini
Small, Medium & Micro Enterprise
Credit Officer
Programme
Busie Simelane
Portfolio Management
Senior Credit Officer
Banele Ginindza
Risk management & Appraisal
Credit Officer
Technics
th
Queeneth Tshabalala
16 Annual Executive Secretary
Executive Secretary
Conference
VENUE
USA
USA
Argentina
Indonesia
RSA
The Corporation is a member of the
Development Finance Institutions
Network of Southern African
Development Community. Its
membership has benefits of sponsorship
of training programmes for staff capacity
building. The Corporation has taken
advantage of such a facility and the
following employees have attended
some of the courses offered.
Siko Ntshalintshali
Manager Business &
Consumer Lending
Brian Dlamini
Credit Officer
Bhekumusa Nxumalo
COURSE DESCRIPTION
Investment appraisal & Risk
Analysis
VENUE
RSA
Analysis
Analysis
RSA
It is worth mentioning that our Manager
Business & Consumer Mr.
Sikolemaswati Ntshalintshali obtained
a Distinction in the Investment Appraisal
Module which earned him a place in a
thirty (30) days training of trainers
course to be held at Queens University
in Canada. We are therefore proud to
have developed exceptional in-house
high level skills in investment appraisal
and risk analysis. We are confident that
this achievement will impact positively
on the organisation’s performance, in
particular the quality of loan appraisals.
Mandla Maphalala
Credit Officer
Brian Dlamini
Credit Officer
RSA
The Corporation by virtue of its
membership and in collaboration with
the World Association for Small and
Medium Enterprises has managed to
send the Agricultural staff for training
in Israel.
Siko Ntshalintshali
Credit Manager Business
RSA
where staff members were supported
by FINCORP.
A culture of continous learning and
career development has been inculcated
among staff members of the
organisation. Employees continuously
seek part time or full time study
opportunities that will impact positively
on both their day to day duties and career
development. Meanwhile the
Corporation seeks to create mutually
agreed career development paths for
each employee. Staff members who opt
COURSE DESCRIPTION
Agricultural Business Development
Training
Agricultural Business Development
Training
RSA
RSA
The Corporation strongly upholds the
importance of staff development and
this has been evident in its continued
investment and willingness in
encouraging, supporting, and facilitating
full-time and part time studies. This
practice is the basic foundation of our
staff development policy and to date we
flaunt various staff academic
achievements over the past one year
VENUE
Israel
Israel
to specialize in specific disciplines
within the organization are free to do
so and they receive all the necessary
support from management.
32
33
Bonkhe Lukhele
Agriculture Credit Officer
Mandla Maphalala
Agriculture credit Officer
CORPORATION LIMITED
CORPORATION LIMITED
NAME OF OFFICER
Justice Simelane
COURSE DESCRIPTION
Financial Accountant
Brian Dlamini
Busie Simelane - Sikhondze
Bhekumusa Nxumalo
Justice Simelane
Financial Accountant
VENUE
ACCA – Glasgow –
UK
MBA –MANCOSA
MBA - University of
Dallas USA
MDS (University of
Potschestroom) – About
to complete
Recruitment
Brian Dlamini
Busie Simelane - Sikhondze
Senior Credit officer
The Corporation has continued to
practice transparent and strategic
recruitment which is mainly achieved
through a panel of interviewers at all
levels. Total staff compliment as at the
end of the year stood at 36. Over the
past one year and in line with the
unprecedented growth of operations,
the Corporation hired nineteen (19)
additional employees showing a more
that 100% increase in our labour force.
It is entrenched in FINCORP’s
recruitment policy to ensure that
recruitment is only done where a need
for an additional officer has been
carefully assessed, analysed and deemed
necessary to guarantee optimal use of
our human capital. The Corporation
has continued to employ transparent
and strategic recruitment practices in
filling vacant positions. Only one
employee resigned during the past year.
With a relatively zero staff turnover.
Staff Board Appointments
FINCORP was honoured by the
appointment of its senior managers to
serve in the Boards of other
organisations that are involved in SME
development. It is hoped that while
they are expected to share their expertise
with the respective organisations, they
will equally amass a lot of knowledge
for the Corporation. They are:
Siko Ntshalintshali - The Trading House
Dumisani Msibi - Technoserve / SWEEP
Below is a table showing the new appointments made during the year:
Bhekamusa Nxumalo
DEPARTMENT
Agriculture Department
Business Department
Consumer Department
Finance Department
Administration Department
Total
NUMBER OF EMPLOYEES
4 employees
4 employees
3 employees
4 employees
4 employees
19 employees
Performance Management
During the year under review the
Corporation in collaboration with its
partners, Swaziland Union of Financial
Institutions and Allied Workers
(SUFIAW), commissioned an
independent consultancy firm known
as P3 Management Consultancy to
review the remuneration, reward and
performance measurement policies of
the organisation. The main aim of the
exercise being to position FINCORP
where it would attract, retain and reward
employees in a fair and balanced
manner. A performance based
measurement and reward system was
an important component of the review
wherein each employee within the
organisation signed a clearly defined
performance contract showing both
quantitative and qualitative performance
objectives, the chief aim being to remove
subjectivity.
Membership to International
Organizations
The Corporation is a member of various
International Organisations, which
membership has added value to the
organization especially with staff
development and training. The
International Organizations are the
following:
1. South African Development
Community Development Resource
Centre (SADC DFRC)
2. World Association of Small
Business Enterprises(WASME)
3. International Council of Small
Business (ICSB)
4. International Small Business
Congress (ISBC)
5. World Micro Credit Summit.
HIV/AIDS at the Workplace
The Corporation is mindful of the
challenges that are posed by the HIV
AIDS pandemic on human capital and
we continue to explore ways and means
to deal with the impact of the scourge,
particularly because we are people
driven. As a routine and on several
occasions the Corporation has called
upon the able hands of the relevant Non
Governmental Organisation (NGOs) to
educate our staff members about the
pandemic mainly on how to deal with
its impact. Clearly if our staff members
are well equipped to deal with HIV
AIDS at the workplace, their families
will also benefit. Once adequately
informed, staff members will also handle
HIV AIDS affected clients with due
care and understanding.
Fincorp Staff Soccer team
Fincorp Staff Netball team
Recreational Activities
In an effort to instil a sense of belonging,
good interpersonal relationships and
team work, the organisation encourages
and supports its employees to take part
in recreational activities such as sports.
To this end football and netball teams
were formed over the past year and were
accorded the necessary financial and
material support by the Corporation.
The teams have continually organised
both local and international sporting
events.
Fincorp Staff going through team building games
34
35
CORPORATION LIMITED
CORPORATION LIMITED
BLENDING BUSINESS WITH CULTURE
BLENDING BUSINESS WITH CULTURE
Blending Business with Culture
John Mahlalela carrying the box
of chickens to be presented to
His Majesty King Mswati III
Diesel fuel pumps operated by
John Mahlalela – Ka- Shewula
John Mahlalela, a sixty nine (69)
years old resident and entrepreneur
of Kashewula in the northern eastern
part of Swaziland, may have
graduated to be one of the most
successful rural entrepreneurs in his
constituency, but he certainly did
not forget his cultural roots and
allegiance to the leaders of the
country. Mahlalela surprised many,
including the sole founder of
FINCORP, His Majesty King
Mswati III, when he defied all
protocol at the Job Creation Summit
held at Mavuso Exhibition Center
to present the King with six free
range chickens as a token of
appreciation for His Majesty’s
concerted efforts to create an
enabling and conducive environment
for indigenous business people. It is
customary practice for Swazi
Nationals to share the fruits of their
labour and successes with the head
of state by making donations to
Royal family (known as kwetfula).
It is believed that when you do that
you are likely to get greater returns
in your business. Whilst this
customary practice may not be
directly likened to the payment of
tithes as stated in the holy bible, it
is more or less similar.
Not only did it end at the Job
Creation Summit, Mahlalela did it
again at the launch of the
Technoserve program known as
Swaziland Enterprise &
Entrepreneurship Programme
(SWEEP) which was also
orchestrated by the King. SWEEP
is a USAID initiative under an
American business development
international program known as
Technoserve. The idea of setting up
the program crystallised at a
consultative meeting held between
his Majesty and the American
Ambassador, Lewis Lucke, and was
aimed at complimenting the Job
Creation Initiative. Upon
successfully reaping the benefits of
the Job Creation Summit, Mahlalela
found himself duty bound to yet
again present His Majesty King
Mswati III with another five
chickens as testimony to the fact that
the Job Creation Summit was for
real and not just a “talk shop”. In a
separate interview with the media
Mahlalela explained that he was
among the first people to take
advantage of the King’s initiative
and secured loan funding from
FINCORP to finance his general
dealer shop situated at Kashewula,
supplying the community with
farming inputs such as fertilizer,
maize seed and chicken feed.
Mahlalela is also supplying diesel
to the farmers of his home area.
Wearing a broad royal smile, His
Majesty gladly accepted the gift
from the grey haired old man, who
was gleering with excitement.
Mahlalela further explains how he
was treated as a King and Master
when he visited FINCORP’s offices
to apply for the loan. He however
did not omit to state that he was not
given all the money that he had
applied for but was told to start small
and grow with the institution. In his
own words Mahlalela states that
although the FINCORP people
helped me, they did not give me all
the money that I had asked for and
I am still going to go back to them
to ask for more money to fulfil my
vision”.
When the King delivered his
ceremonial closing remarks and vote
of thanks, he singled out the kind
gesture shown by Mahlalela and
mentioned that it was rare for people
to come out in the open and declare
in public as having received money
from the local financial institutions.
His Majesty encouraged more
Swazis to make use of the available
business opportunities in Swaziland
in order to take control of the
economy and define their own
destiny. Finally, he encouraged
people to make use of the SWEEP
program.
His Majesty King Mswati III admiring the gift of chickens presented by John Mahlalela
36
37
CORPORATION LIMITED
CORPORATION LIMITED
ANNUAL FINANCIAL STATEMENTS
ANNUAL FINANCIAL STATEMENTS
for the year ended 31 March 2006
CONTENTS
Page
Corporate governance statement
40
Statement of directors responsibility
41
Report of the independent auditors
42
Directors’ report
43 - 46
Income statement
47
Balance sheet
48
Statement of changes in equity
49
Cash flow statement
50
Summary of accounting policies
51 - 61
Notes to the annual financial statements
62 - 78
Detailed income statement
Annexure 79
Taxation schedules
Annexure 80
Annual Financial Statements Graphs
81 - 82
38
39
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF
CORPORATE
DIRECTOR GOVERNANCE STATEMENT
STATEMENT OF DIRECTORS’ RESPONSIBILITY
The Directors of Swaziland Development Finance Corporation Limited confirm their commitment to the principles
of openness, integrity and accountability as advocated in the King II Code on Corporate Governance. Through
this process, shareholders and other stakeholders may derive assurance that the Corporation is being ethically
managed according to prudently determined risk parameters in compliance with generally accepted corporate
practices. Monitoring the Corporation’s compliance with the King Code on Corporate Governance forms part
of the mandate of the Corporation’s executive committee.
Board of directors
The Board has two committees the Main Board and the Executive Committee. Both the Main Board and the
Executive committee meet quarterly, but special Board meetings are convened when necessary. The Main Board
monitors management and ensures that material matters are subject to Board approval such as the approval of
loans. The Executive Committee’s main functions are to review the Corporation’s financial statements,
management accounts, operational matters, staff matters and then advise the Main Board.
The Board comprises 9 directors of whom only one serves in an executive capacity. The board is balanced so
that no individual or Corporation can dominate decision-making. The directors of the Corporation are listed on
page 6. Roles of chairperson and chief executive do not vest in the same person and the chairperson is a nonexecutive. The non-executive directors comprise individuals with diverse backgrounds and expertise. The
chairperson and managing director provide leadership and guidance to the Corporation’s Board and encourage
deliberation of all matters requiring the Boards attention, and obtain sufficient input from the other board members.
The chairperson and directors are elected on a three-year basis.
The directors are responsible for the maintenance of adequate accounting records and the preparation and integrity
of the financial statements and the related information. The auditors are responsible for reporting on the fair
presentation of the financial statements. The financial statements have been prepared in accordance with
International Financial Reporting Standards and in the manner required by the Swaziland Companies Act as
amended.
The directors are also responsible for the Corporation’s system of internal financial control. These are designed
to provide reasonable, but not absolute, assurance as to the reliability of the financial statements, and to adequately
safeguard, verify and maintain accountability of the assets, and to prevent and detect misstatement and loss.
Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of
these controls, procedures and systems has occurred during the year under review.
The going concern basis has been adopted in preparing the financial statements. The directors have no reason
to believe that the Corporation will not be a going concern in the foreseeable future based on forecasts and
available cash resources. These financial statements support the viability of the Corporation.
The financial statements have been audited by the independent accounting firm, PricewaterhouseCoopers, which
was given unrestricted access to all financial records and related data, including minutes of the board of directors
and committees of the board. The directors believe that all representations made to the independent auditors
during their audit are valid and appropriate. PricewaterhouseCoopers’ audit report is presented on page 42.
The annual financial statements which appear on pages 38 to 82 have been approved by the board of directors
on ______________________ and are signed on its behalf by:
Risk Management
Effective risk management is essential to the Corporation’s objective of consistently adding value to the business
objectives. The Corporation’s management is continuously developing and enhancing its risk and control
procedures to improve the means for identifying and monitoring risks.
Operating risk is the potential for loss to occur through a breakdown in control information, business processes
and compliance systems. Key policies and procedures are in place to manage operating risk involving segregation
of duties, transaction authorisation, supervision, monitoring and financial and managerial reporting.
CHAIRMAN
MANAGING DIRECTOR
Financial risk management is disclosed in the notes to the financial statements.
40
41
CORPORATION LIMITED
CORPORATION LIMITED
REPORT
OF THE INDEPENDENT AUDITORS
BOARD OF
DIRECTOR
DIRECTORS’ REPORT
TO THE MEMBERS OF SWAZILAND DEVELOPMENT FINANCE CORPORATION
LIMITED
We have audited the financial statements of Swaziland Development Finance Corporation Limited for the year
ended 31 March 2006 set out on pages 38 to 82. These financial statements are the responsibility of the
Corporation’s directors. Our responsibility is to report on these financial statements.
Scope
We conducted our audit in accordance with International Standards on Auditing. Those standards require that
we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material
misstatement. An audit includes:
•
•
•
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements,
assessing the accounting principles used and significant estimates used by management, and
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
Audit opinion
In our opinion, the financial statements fairly present, in all material respects, the financial position of the
Corporation at 31 March 2006, and the results of its operations and cash flows for the year then ended in accordance
with Swaziland and International Financial Reporting Standards and in the manner required by the Swaziland
Companies Act 1912, as amended.
The directors have pleasure in submitting their report, which forms part of the financial statements of the
Corporation for year ended 31 March 2006.
1.
Nature of Business
The Corporation is incorporated in Swaziland and operates as a lending institution to qualifying individuals and
businesses.
2.
Financial Results
Swaziland Development Finance Corporation Limited has experienced a number of developments during this
financial year. Some of these are highlighted below:
Financial performance
Income
This year we have seen improved financial results in comparison to the previous year. Interest earned from our
loan portfolio is E32 million. This represents a 52% increase from the previous year and is due to an increase
in our loan portfolio. The loan portfolio has increased from last years gross value of E126 million to E221 million
as at year end.
Operating expenses
Our operating expenses have increased by 22%. This, however, is in line with the increase in the level of
operations which has even necessitated that we move offices from Asakhe house to Dlanubeka building.
Interest Expense
This year’s interest expense has increased significantly. This is due to extra funding obtained during the year.
E14.8 million was received from the African Development Bank (ADB), E20 million from the Central Bank of
Swaziland, USD3 million (E18 447 000) from the OPEC fund and E0.5 million from Tibiyo TakaNgwane.
Provisions
PRICEWATERHOUSECOOPERS
To comply with the requirements of International Accounting Standard 39, Financial Instruments an impairment
CHARTERED ACCOUNTANTS
of loans and advances of E11.9 million had to be recognised in the income statement. The requirement of the
(SWAZILAND)
standard is that the impairment be calculated as the difference between carrying amount and the recoverable
amount of the loans.
DATE
Profit
The net profit has increased significantly from the previous year. This is largely due to the increase in the interest
income which has been highlighted above.
42
43
CORPORATION LIMITED
CORPORATION LIMITED
DIRECTORS’
REPORT
BOARD OF
DIRECTOR
DIRECTORS’ REPORT
for the year ended 31 March 2006 (continued)
Loan portfolio
Our loan portfolio has also increased significantly from the previous year. This increase has been funded by
additional loans of E14.8 million from the African Development Bank (ADB), E20 million from the Central
Bank of Swaziland, USD3 million from the OPEC fund and E0.5 million from Tibiyo TakaNgwane as already
mentioned. The extra funding has been necessitated by the increase in the demand for business loans by the public
which results from the Job Creation initiative. A summary of the loans approved during the year is given below:
ADB Loan Fund
As at the end of the year under review, a total sum of E44 million had been received from government under the
E75 Million ADB Loan Fund. The amount received from the loan fund has been fully utilised towards financing
seasonal loans. However new developments or expansions have been suspended pending the completion of the
ongoing consultations regarding the future of the sugar industry in Swaziland.
1.
Loan Type
Other agriculture loans
General business
59 334 026
Sugar cane seasonal loans
Consumer loans
Kobwa Scheme (business)
Value of Loans
Approved
E
22 291 585
Disbursed
E
14 721 892
49 705 685
45 241 975
65 688 331
5 100
175 362 983
60 879 309
66 370 259
5 100
208 880 279
Number of
Loans Approved
E
189
681
83
6995
1
7 949
Share Capital
The authorised share capital is 10 000 ordinary shares at E1 each of which 1 000 ordinary shares have been issued
at a premium of E84 224.07 per share, and remained unchanged during one year.
2.
Dividends
The directors do not recommend that a dividend be paid in respect of the period under review.
5.
Directors
The directors who acted during the period are:
Vincent Mhlanga
Leases and fixed assets
During the year the Corporation acquired ten new motor vehicles in replacement of old vehicles. Our loan portfolio
had increased and to improve monitoring of the loans it became necessary for the Corporation to change its fleet.
Managing Director
Resigned as Chairman and reappointed as a Member on 08 September 2005
Leonard Sithebe
Representing Tibiyo TakaNgwane
Special projects
Resigned and reappointed as Members on 08 September 2005:
Musa Mdluli
Simanga Simelane
Swaziland Dairy Board
The initial seed capital of E1.5 Million for the Dairy Fund has been fully committed during the year. Progress
of the already financed projects is being monitored very closely in order to establish the sustainability of the fund.
Most of the farmers are still at the early stages of their business cycle and would only start making repayments
at the end of 2006.
Resigned on 28 February 2006
Christabel Motsa
Musa Sibandze
Indvuna Mlobokazana Fakudze
Bertram Stewart
Mbuso Simelane
Mduduzi Zwane
Swaziland Ex-Miners Voluntary Deferred Pay Credit Guarantee Fund
The loan fund of E2.5 Million under Ex-miners Voluntary Deferred Pay Fund has also been fully committed.
The Voluntary Deferred Pay Board is due to meet FINCORP at the beginning of the next year in order to review
performance results of the fund over the past one full year.
Representing Swaziland Government
New board members appointed on 24 May 2006:
Almon Mbingo
Chairman, Representing Swaziland Government
Mandla Mavuso
Nomsa Tibane
Musa Sibandze
Mduduzi Zwane
6.
Secretary
The Secretary of the Corporation is: Mr Dumisani Msibi.
44
45
CORPORATION LIMITED
CORPORATION LIMITED
DIRECTORS’ REPORT
BOARD OF DIRECTOR
INCOME STATEMENT
7.
Bankers
Notes
2006
E
2005
E
The Bankers of the Corporation are:
Interest income
Interest expenditure
First National Bank Swaziland Limited
P O Box 261
Eveni.
Swaziland
8.
1
2
Net interest income before impairment of
loans and advances
21 067 466
(1 521 705)
26 091 303
19 545 761
Business and postal address of the Corporation
Impairment of loans and advances
Business address:
Postal address:
7th floor, Dlanubeka Building
Corner of Mdada and Lalufadlana Streets
Mbabane
P O Box 6099
Mbabane
Swaziland
10
Net interest income after impairment of
loans and advances
Non-interest income
9.
32 027 038
(5 935 735)
(11 888 737) (9 408 766)
14 202 566
3
10 136 995
1 535 435
754 087
Auditors
Total income from operations
15 738 001
10 891 082
The auditors of the Corporation are:
Operating expenditure
PricewaterhouseCoopers Swaziland
P O Box 569
Mbabane
Swaziland
Taxation
10. Subsequent events
Profit for the period
4
Income from operation before taxation
6
(12 033 979) (9 901 943)
3 704 022
989 139
(955 506)
(296 741)
2 748 516
692 398
A new board of directors was appointed on 24 May 2006.
46
47
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF
DIRECTOR
BALANCE
SHEET
STATEMENT OF CHANGES IN EQUITY
at 31 March 2006
Notes
ASSETS
Non-current assets
Property, plant and equipment
Loans and advances
Financial assets - Available for sale
Deferred tax
8
9
11
7
2006
E
3 173 839
108 762 782
1 522 500
295 621
113 754 742
Current assets
Loans and advances
Receivables and prepayments
Cash and cash equivalents 13
9
12
87 170 972
9 800 572
3 332 266
100 303 810
Total assets
2005
E
1 025 780
76 211 412
1 522 500
214 030
Share
Capital
E
Share
Premium
E
Opening balance 1 April 2005
Profit for the period
Transfer to General Risk Reserve
1 00084 224 069
-
Balance at 31 March 2006
1 000
Opening balance: 1 April 2004
Profit for the year
Transfer to General Risk Reserve
1 00084 224 069
-
Balance at 31 March 2005
1 00084 224 069
General
RiskRetained
Reserve
Income Total
E
E
-
2 268 086
1 650 589
84 224 069
3 918 675
2 818 278
90 962 022
Non-current liabilities
Borrowings
Current liabilities
Borrowings
Trade and Accounts payable
Bank overdraft
Derivative financial instruments
Taxation
Provisions
14
14
15
1 000
84 224 069
3 918 675
2 818 278
37 192 904
6 260 795
7 025 800
1 798 909
469 177
1 497 130
692 398
(469 177)
87 521 108
692 398
-
2 268 086
1 720 351
88 213 506
-
50 479 499
1 000
84 224 069
2 268 086
1 720 351
90 962 022
88 213 506
16
90 291 779
35 000 000
16
17
13
20
18
19
4 783 728
6 843 882
15 189 370
2 650 000
2 230 761
1 107 010
4 247 618
1 193 664
798 433
32 804 751
6 239 715
Total current liabilities
Equity and liabilities
1 720 351 88 213 506
2 748 516
2 748 516
(1 650 589) -
78 973 722
214 058 552 129 453 221
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital
Share premium
General Risk Reserve
Retained Income
E
214 058 552 129 453 221
48
49
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OFCASH
DIRECTOR
FLOW STATEMENT
SUMMARY OF ACCOUNTING POLICIES
Notes
2006
E
2005
E
The principal accounting policies applied in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
A
Cash flow from operating activities
Cash utilised from operating activities
23
Basis of preparation
The financial statements have been prepared on the historical cost basis in accordance with International Financial
Reporting Standards, using the historical cost convention as modified by the revaluation of available for sale
financial assets and financial assets and liabilities at fair value through profit or loss.
(77 706 785) (18 933 827)
Cash flow from investing activities
Purchase of property, plant and equipment
Proceeds from sale of equipment
(674 353)
61 321
(24 695)
-
Net cash utilised from investing activities
(613 032)
(24 695)
The preparation of financial statements in conformity with generally accepted accounting principles requires the
use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are based on management’s best knowledge of
current events and actions, actual results ultimately may differ from those estimates.
B
Cash flow from financing activities
Increase in long term loan
Finance lease principal payments
59 577 244
(140 331)
25 000 000
Net cash inflows from financing activities
59 436 913
25 000 000
(1) Functional and presentation currency
Items included in the financial statements of the entity are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The financial statements are presented in
Emalangeni, which is the Corporation’s functional and presentation currency.
Movement in cash and cash equivalents
(2)
At start of period
Net (decrease)/increase in cash and
cash equivalents
7 025 800
At end of year
13
Foreign currency translation
Transactions and balances
984 322
(18 882 904)
6 041 478
(11 857 104)
7 025 800
Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in
the income statement.
Translation differences on debt securities and other monetary financial assets measured at fair value are included
in foreign exchange gains and losses which are recognised in the income statement.
C
Property, plant and equipment are stated at historical cost less depreciation and impairment losses. Cost includes
all costs directly attributable to bringing the asset to working condition for its intended use. After recognition
as an asset, an item of property, plant and equipment shall be carried at its cost less any accumulated depreciation
and any accumulated impairment losses. Depreciation is calculated on the straight line method to write off the
cost or revalued amount of the asset to their residual value over their estimated useful lives as follows:
50
51
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF SUMMARY
DIRECTOROF ACCOUNTING POLICIES
Property, plant and equipment and Depreciation (Continued)
The Corporation creates a further portfolio impairment in respect of non-performing advances where there is
objective evidence that components of the loan portfolio contain probable losses at the balance sheet date. When
an advance is un-collectable, it is written off against the related impairments. Subsequent recoveries are credited
to income.
The principal annual rates used for this purpose are:Computer Equipment
Furniture and fittings
Office furniture
Motor vehicle
331/3%
10%
10%
20%
Gains and losses on disposal are determined by comparing proceeds with the carrying amount and are included
in operating profit. When revalued assets are sold, the amounts included in fair value reserves are transferred to
retained earnings.
Repairs and maintenance are charged to the income statement during the financial period in which they are
incurred. The cost of major renovations is included in the carrying amount of the assets when it is probable that
future economic benefits in excess of the originally assessed standard of performance of the existing assets will
flow to the Corporation. Major renovations are depreciated over the remaining useful life of the related assets.
D
The Corporation further creates a general provision calculated at 2% of the net loan book. This amount is accounted
for through the statement of changes in equity under “General Risk Reserve” and does not affect the income
statement.
The Corporation reverses impairments through the income statement, if the amount of the impairment subsequently
decreases due to an event occurring after the write-down.
G
Leased assets
Leases of property, plant and equipment where the Corporation has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower
of the fair value of the leased property and the present value of the minimum lease payments.
Impairment of long lived assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by
which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an
asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
E
The Corporation writes off advances once all reasonable attempts at collection have been made and there is no
realistic prospect of recovering outstanding amounts.
Loans and advances
Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the
finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other
long-term payables. The interest element of the finance cost is charged to the income statement over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life
of the asset or the lease term.
All loans and advances are recognised when cash is advanced to borrowers. These are carried at original amounts
advanced less provisions made for impairment. A provision for impairment is established when there is objective
evidence that the Corporation will not be able to collect all amounts due according to the original terms of the
loan. The amount of the provision is determined by following the Corporation’s provisioning policy.
Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified
as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to the income statement on a straight-line basis over the period of the lease. In all significant leasing
arrangements in place during the year, the Corporation acted as a lessee.
F
H
Loans and advance impairment
The Corporation creates a specific provision for impairment in respect of non-performing advances when there
is objective evidence that it will not be able to collect all amounts due. The impairment is calculated as the
difference between the carrying amount and the recoverable amount, calculated as the present value of expected
future cash flows, including amounts recoverable from guarantees and collateral, discounted based on the original
effective interest rate at inception of the advance.
Financial assets
The Corporation classifies its investments in the following categories: financial assets at fair value through profit
or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification
depends on the purpose for which the investments were acquired. Management determines the classification of
its investments at initial recognition and re-evaluates this designation at every reporting date.
52
53
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
1)
Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at fair value
through profit or loss at inception. A financial asset is classified in this category if acquired principally
for the purpose of selling in the short term or if so designated by management. Derivatives are also
categorised as held for trading unless they are designated as hedges. Assets in this category are classified
as current assets if they are either held for trading or are expected to be realised within 12 months of the
balance sheet date.
2)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They arise when the Corporation provides money, goods or services
directly to a debtor with no intention of trading the receivable. They are included in current assets, except
for maturities greater than 12 months after the balance sheet date. These are classified as non-current
assets. Loans and receivables are included in trade and other receivables in the balance sheet.
3)
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
and fixed maturities that the Corporation’s management has the positive intention and ability to hold to
maturity. During the year, the Corporation did not hold any investments in this category.
4)
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or cannot
be classified in any of the other categories. They are included in non-current assets unless management
intends to dispose of the investment within 12 months of the balance sheet date.
Purchases and sales of investments are recognised on trade date, the date on which the Corporation
commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction
cost for all financial assets not carried at fair value through profit or loss.
H
Financial assets (continued)
4) Available-for-sale financial assets (continued)
Investments are derecognised when the rights to receive cash flows from the investments have expired
or have been transferred and the Corporation has transferred substantially all risks and rewards of ownership.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently
carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost
using the effective interest method. Realised and unrealised gains and losses arising from changes in the
fair value of the "financial assets at fair value through profit or loss" category are included in the income
statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair
value of non-monetary securities classified as available-for-sale are recognised in equity. When securities
classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included
in the income statement as gains and losses from investment securities.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset
is not active, the Corporation establishes fair value by using valuation techniques. These include the use
of recent arm's length transactions, reference to other instruments that are substantially the same, discounted
cash flow analysis, and option pricing models refined to reflect the issuer's specific circumstances.
The Corporation assesses at each balance sheet date whether there is objective evidence that a financial
asset or a group of financial assets is impaired. In the case of equity securities classified as available for
sale, a significant or prolonged decline in the fair value of the security below its cost is considered in
determining whether the securities are impaired. If any such evidence exists for available-for-sale financial
assets, the cumulative loss - measured as the difference between the acquisition cost and fair value, less
any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity
and recognised in the income statement. Impairment losses recognised in the income statement on equity
instruments are not reversed through the income statement.
Investments intended to be held for an indefinite period of time, which may be sold in response to needs
for liquidity or changes in interest rates, are classified as available-for-sale; and are included in non-current
assets unless management has the express intention of holding the investment for less than 12 months
from the balance sheet date or unless they will need to be sold to raise operating capital, in which case
they are included in current assets.
Purchases and sales of investments are recognised on the trade date, which is the date that the Corporation
commits to purchase or sell the asset. Cost of purchase includes transaction costs.
54
55
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
H
Financial assets (continued)
Service fees and commission income
The Corporation recognises service fee and commission income on an accrual basis when the service is rendered.
4) Available-for-sale financial assets (continued)
J
Financial assets at fair value through profit and loss, and available-for-sale investments are subsequently
carried at fair value. Held-to-maturity investments are carried at amortised cost using the effective yield
method. Realised and unrealised gains and losses arising from changes in the fair value of trading
investments and available-for-sale investments are included in the income statement in the period in which
they arise.
General Risk Reserve
General provisions which are calculated at 2% of the net loans, equities and finance leases after specific provisions
are dealt with within the statement of changes in equity as appropriation of retained earnings. This treatment is
in accordance with IAS 39.
K
The fair values of investments are based on stock exchange quoted bid prices or amounts derived from
cash flow models. Fair values for unlisted equity securities are estimated using applicable price/earnings
or price/cash flow ratios refined to reflect the specific circumstances of the issuer. Equity securities for
which fair values cannot be measured reliably are recognised at cost less impairment.
Financial Instruments
Financial instruments carried in the balance sheet include cash and bank balances, investments, receivables, trade
creditors, leases and borrowings and derivatives. The particular recognition methods adopted are disclosed in
the individual policy statements associated with each item.
Financial risk factors
5) Offset of financial assets and liabilities
Financial assets and financial liabilities are offset in the amount represented in the balance sheet when
the Corporation has a legally enforceable right to set off the recognised amount, and intends either to
settle on a net basis, or to realise the assets and settle the liability simultaneously.
I
Revenue recognition
Revenue comprises of interest income accounted in the income statement on the accrual method. Revenue from
rendering of services is recognised by reference to the completion of the specific transaction assessed as the basis
of the actual service provided as a proportion of the total services provided when it is probable that the economic
benefits associated with a transaction will flow to the Corporation and the amount of revenue, and associated
costs incurred or to be incurred can be measured reliably.
Interest income
Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable
is impaired, the Corporation reduces the carrying amount to its recoverable amount, being the estimated future
cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount
as interest income. Interest income on impaired loans is recognised either as cash is collected or on a cost–recovery
basis as conditions warrant.
The Corporation’s activities expose it to a variety of financial risks. The Corporation’s overall risk management
programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects
on the financial performance of the Corporation. Risk management is carried out by management under policies
approved by the Board of Directors. Management identifies, evaluates and hedges financial risks in close cooperation with the Corporation operating units. The Board provides written principles for overall risk management,
as well as written policies covering specific areas such as interest rate risk, credit risk and investing excess
liquidity.
(i) Interest rate risk
The Corporation’s income and operating cash flows are substantially independent of changes in market
interest rates. The Corporation has significant interest-bearing assets. The Corporation has no policies in
place to hedge against fluctuating interest rate.
(ii) Credit risk
The Corporation has exposure to credit risk, which is the risk that a counterpart will be unable to pay amounts
in full when due. Key areas where the Corporation is exposed to credit risk are:
-
loans and advances,
-
receivables and prepayements,
The Corporation structures the levels of credit risk it accepts by placing limits on its exposure to a single
counterpart, or groups of counterparties. Such risks are subject to an annual or more frequent review.
From an operational perspective, it suspends the accrual of interest on a loan when its recovery is considered
doubtful. However, in terms of IAS 39 interest income on impaired advances is thereafter recognised based on
the original effective interest rate used to determine the recoverable amount.
56
57
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
Financial Instruments (Continued)
Derivative financial instruments and hedging (continued)
On the date a derivative is entered into, the Corporation designates certain derivates as either:
(ii) Credit risk (continued)
i) a hedge of the fair value of a recognised asset or liability (“fair value hedge”), or
ii) a hedge of a future cash flow attributable to a recognised asset or liability, a forecasted transaction
or a firm commitment (“cash flow hedge”).
The major concentration of credit risk arises from the Corporation’s receivables and investment securities
in relation to the nature of customers and issuers. No collateral is required in respect of financial assets.
Reputable financial institutions are used for investing and cash handling purposes.
L
Mechanisms are in place to monitor the risk of default by individual loanholders. Exposures to individual
loanholders and group of loanholders are collected within the ongoing monitoring of the controls associated
with regulatory solvency. Where there exists significant exposure to individual loanholders, or homogenous
group of loanholders, a financial analysis is carried out by the Corporation.
Quality control and risk department makes regular reviews to assess the degree of compliance with the
Corporation procedures on credit and the overall control environment.
At balance sheet date there were no significant concentrations of credit risk. The maximum exposure
to credit risk is represented by the carrying value of each financial asset in the balance sheet.
(iii)
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the
availability of funding through an adequate amount of committed credit facilities and the ability to close
out market positions. The Corporation maintains sufficient cash and near cash assets to meet its liquidity
commitments. Due to the dynamic nature of the underlying businesses, the Corporation aims at maintaining
flexibility in funding by keeping committed credit lines available.
Derivative financial instruments and hedging
Derivative financial instruments including foreign exchange contracts, currency and interest rate swaps and other
derivative financial instruments are initially recognised in the balance sheet at cost (including transaction costs)
and subsequently are remeasured at their fair value. Fair values are obtained from quoted market prices, discounted
cash flow models as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities
when fair value is negative.
Taxation
Deferred income taxes
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax
rates are used in the determination of deferred income tax.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available
against which the temporary differences can be utilised. Deferred tax liabilities and deferred tax assets are
recognised for all temporary difference arising from the following differences:
i)
The excess of book values of fixed assets over their written down values for tax purposes;
ii)
The excess of book values of finance leases over their written down values for tax purposes;
iii) Income and expenditure in the financial statements of the current year dealt with in other years for tax
purposes.
Current Tax
The charge for the current tax is the amount of income taxes payable in respect of the taxable profits for the
current period. It is calculated using tax rate that have been enacted or substantially enacted by the balance sheet
date.
M Provisions
Provisions are recognised when the Corporation has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate
of the amount can be made. Where the Corporation expects a provision to be reimbursed, for example under an
insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is
virtually certain.
Changes in the fair value of the effective portions of derivatives that are designed and qualify as fair value hedges
and that prove to be highly effective in relation to hedged risk, are recorded in the income statement, along with
the corresponding change in fair value of the hedged asset or liability.
The Corporation recognises a provision for onerous contracts when the expected benefits to be derived from a
contract are less than the unavoidable costs of meeting the obligations under the contract.
Certain derivative transactions, while providing economic hedges under the risk management policies, do not
qualify for hedge accounting under the specific rules in IAS 39 and are therefore treated as derivatives held for
trading with fair value gains and losses reported in income.
Restructuring provisions comprise lease termination penalties and employee termination payments, and are
recognised in the period in which the Corporation becomes legally or constructively committed to payment. Costs
related to the ongoing activities of the Corporation are not provided in advance.
58
59
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
N
Cash and cash equivalents
Q
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement,
cash and cash equivalents comprise cash on hand, deposits held with banks, other short term high liquid investments
with original maturities of three months or less, and bank overdrafts.
Bank overdrafts are included within borrowings in current liabilities on the balance sheet.
O
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment. A provision for impairment of trade receivables is
established when there is objective evidence that the Corporation will not be able to collect all amounts due
according to the original terms of receivables. The amount of the provision is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate.
The amount of the provision is recognised in the income statement.
P
Borrowings
Borrowings are recognised initially at the fair value of proceeds received, net of transaction costs incurred, when
they become party to the contractual provisions. Borrowings are subsequently stated at amortised cost using the
effective interest rate method; any difference between the proceed (net of transaction value) and the redemption
value is recognised in the income statement over the period of the borrowings.
Q
Employee benefits (continued)
Termination benefits
Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement
date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Corporation
recognises termination benefits when it is demonstrably committed to either terminate the employment of current
employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits
as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after
balance sheet date are discounted to present value.
Performance bonus
A liability for employee benefits in the form of performance bonus is recognised in current provisions when there
is no alternative but to settle the liability, and at least one of the following conditions is met;
- there is a formal plan and the amounts to be paid are determined before the time of issuing the financial
statements; or
- past practice has created a valid expectation by employees that they will receive a bonus and the amount can
be determined before the time of issuing the financial statements.
Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected
to be paid when they are settled.
Employee benefits
Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in which the employee renders the
related service. The provision for employee entitlements to salaries and annual leave represent the amount that
the Corporation has a present obligation to pay, as a result of employees’ services provided up to the balance
sheet date. The provision has been calculated at undiscounted amounts based on current salary rates.
Pension Obligations
The Corporation operates a defined contribution plan. The Corporation pays contributions to a privately administered
pension plan on a mandatory, contractual or voluntary basis. Once the contributions have been paid, the Corporation
has no further payment obligations. The regular contributions constitute net periodic costs for the year in which
they are due and as such are included in staff costs.
Statutory obligations
Provision is not made for statutory termination obligations in terms of the Employment Act, 1980. It is considered
that the Corporation’s contribution to the Pension Fund which can be recovered against such statutory obligations,
at present, exceed any such liability.
R
Comparative Figures
Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current
year.
60
61
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
NOTES TO THE FINANCIAL STATEMENTS
2006
E
1
Interest income
Revenue consists of the aggregate of interest
income received and accrued as follows:
Business loans
Consumer loans
Agriculture loans
Sugar cane loans
2
2005
E
4
4 317 701
12 988 704
1 618 613
13 102 020
12 869 401
32 027 038
21 067 466
Interest expenditure
Interest expense:
Bank borrowings
Finance leases
Interest payable on long term loans
500 815
82 875
5 352 045
1 521 705
5 935 735
1 521 705
Total operating expenditure
5
3
Application fee
Loan Monitoring fee
Management fee
Investment income – dividends
Interest on staff loans
Other non-interest income
775 550
375 208
29 544
232 622
91 766
30 745
190 450
321 312
139 288
95 737
7 300
1 535 435
754 087
165 000
77 578
103 200
-
90 393
198 723
5 180 296
215 095
22 086
588 410
60 609
1 249 358
4 186 431
271 954
4 102 304
19 034
235 529
2 918 400
2 251 522
12 033 979
9 901 943
4 308 174
11 731
211 150
649 241
3 202 013
6 495
224 783
669 013
5 180 296
4 102 304
1 037 097
(81 591)
420 481
(123 740)
955 506
296 741
Staff costs
Salaries
Provident Corporation Contributions
Pension costs (defined contribution plan)
Other benefits and costs
Non-interest income
2005
E
Operating expenditure
Auditors remuneration - audit fees
- fee for other services
Depreciation on fixed assets
Leased assets under finance lease
Staff costs (note 5)
Loss on disposal
Repairs and maintenance
Operating lease rentals
Bad debts
Foreign exchange loss - net
Other operating costs
1 738 827
5 471 726
987 512
2006
E
The average number of persons employed by the
Corporation during the year was 27 (2005:20).
6
Taxation
Swaziland normal Corporation taxation (refer note 18)
- Current tax
- Deferred tax (refer note 7)
62
63
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
31 March 2005
Deferred tax assets
Provisions
90 290
123 740
214 030
65
1 025 780
683 085
86 697
(26 755)
145 353
110 645
1 480 049
(454 269)
172 108
147 815
(61 118)
129 646
1 030 480
(19 001) (347 395)
1 025 780
145 353
(99 788)
(16 151)
86 697
110 645
683 085
-
1 273 039
24 695
(271 954)
(12 296) (203 246)
161 504
-
122 941
886 331
-
-
3 173 839
493 582 1 840 515
102 263
24 695
(40 261)
569 644
571 171
(319 603)
118 318
493 582 1 840 515
47 524
(29 568) (236 648)
159 494
(10 283) (112 349)
118 318
469 856
251 568
2 039 238
36 335
(235 058)
683 085
-
64
Leased motor vehicles comprised of 10 motor vehicles, which were acquired during the year under finance leases
(where the Corporation is the lessee).
295 621
Net book amount
81 591
Closing net book amount
At 31 March 2005
Cost
Accumulated depreciation
214 030
Closing net book amount
At 31 March 2006
Cost
Accumulated depreciation
At end of the year
(36 177)
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The
movement in deferred tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction)
during the period is as follows:31 March 2006
Opening
Charged to
Closing
balance net profit
balance
E
E
E
Deferred tax assets
Provisions
214 030
64 073
278 103
Capitalised finance lease assets
17 518
17 518
145 353
360 680
-
214 030
Computer Furniture
Equipment & fittings
E
295 621
At end of the year
2005
E
90 290
123 740
8
At the beginning of the year
Income statement charge (refer note 6) 81 591
2006
E
214 030
E
The movement on the deferred income tax account is as follows:
86 697
266 149
(10 200)
(91 078)
Office
Equipment
E
Deferred income taxes are calculated in full on temporal differences under the liability method using a principal
tax rate of 30% (2005:30%). Deferred tax arises from the following item:
110 645
Deferred tax
Period ended 31 March 2006
Opening balance
Additions
Disposals
Review of residual value
Depreciation
7
E
Leased
Motor
Taxation has been computed in accordance with the Swaziland Income Tax Order of 1975 as amended.
469 856
29.00%
251 568
26.00%
Net book amount
Year ended 31 March 2005
Opening Balance
Additions
Depreciation
Effective taxation rate
4 329 545
(1 155 706)
30.00%
(1.00%)
Taxation (continued)
168 153
981 339 2 039 239
(49 835) (487 757)
(198 723)
30.00%
(4.00%)
3 173 839
Taxation rate reconciliation:
Standard taxation rate
Income not subject to tax
1 025 780
2 713 591
(276 416)
195 829
(484 945)
2005
E
Total
E
2006
E
Motor
Vehicles Vehicles
E
6
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
2006
E
9
2005
E
Loans and advances
2006
E
9
Business and other loans
Consumer loans
171 488 270 102 283 838
49 921 342 24 235 359
Gross advances
221 409 612 126 519 197
Current Portion
(87 170 972) (37 192 904)
Less: Impairment
- sugar cane loans
- other loans
(25 475 858) (13 114 881)
(15 229 550) (7 582 149)
(10 246 308) (5 532 732)
Non- current loans and advances
108 762 782
The maturity of loans and advance is as follows:
Not later than 1 year
Later than 1 year and not later than 2 years
Later than 3 years
87 170 972
31 971 531
102 267 109
Loans and advances (continued)
Sector analysis
Micro loans
Dressmaking/tailoring & knitting3 124 306
Fruits and vegetables
Grocery and retailing
Handicraft
Hawking
Heavy Haulage
Maize and other cereal
Other Agricultural activities
General business
Poultry
Sugar cane farming
Transport services
76 211 412
37 192 904
16 043 746
73 282 547
2005
E
49 921 342
3 600 907
2 011 057
49 143
484 086
13 453 865
4 057 363
6 984 582
32 757 784
1 733 213
98 896 794
4 335 170
24 235 359
902 978
618 340
1 288 438
530 404
55 514
1 070 970
173 947
4 745 687
4 641 750
245 822
87 049 097
960 891
221 409 612 126 519 197
(25 475 858)
(13 114 881)
195 933 754 113 404 316
221 409 612 126 519 197
10
The nominal interest rates on receivables (current and non-current) were as follow:
2006
E
%
15.5
36
Business and other loans
Consumer loans
2005
E
%
19
36
Present value adjustment relating to IAS39
Bad debts recovered
(12 360 577) (9 978 963)
471 840
570 197
(11 888 737) (9 408 766)
11
Investments – available for sale
These are Swaziland Building Society
permanent shares.
1 522 500
The investment has been pledged as security in respect of staff housing loans with
Swaziland Building Society (refer note 21).
66
67
1 522 500
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
2006
E
2005
E
15
General risk reserve
The general risk reserve arises from the disclosure requirement of IAS 39 regarding the treatment of
general provisions. General provisions are accounted for through the statement of changes in equity in
general risk reserve.
12 Receivables and prepayments
Interest accrued
Staff loans
Prepayments
Sundry deposits
7 207 197
2 547 828
30 037
15 510
5 198 632
920 445
127 688
14 030
9 800 572
6 260 795
Opening balance
General provisions raised during the period
2006
E
2 268 086
1 650 589
2005
E
1 798 909
469 177
Closing balance
3 918 675
2 268 086
13 Cash and cash equivalents
For the purpose of cash flow statement, cash
and cash equivalent comprise the following:
16
Bank balances and short-term bank deposits
3 332 266
7 025 800
Bank overdraft
(15 189 370)
-
Cash and cash equivalents
(11 857 104)
Borrowings
Swaziland Government
OPEC Fund
Tibiyo TakaNgwane
Finance lease liabilities
7 025 800
The bank overdraft is secured by a negative
pledge of assets. Interest rate is charged
at prime rate per annum.
(a)
(b)
(c)
(d)
(e)
Total borrowings
Current
Finance lease liabilities
14 Share capital
The share capital of the Corporation consists of the following:
Authorised
10 000 ordinary shares at E1 each 10 000
Total current borrowing
10 000
Issued
1 000 ordinary shares
Total non current borrowings
a)
1 000
Premium on issue of shares
(b)
(e)
84 224 069
1 000
30 000 000
44 229 600
18 447 000
500 000
1 898 907
10 000 000
25 000 000
95 075 507
35 000 000
-
4 422 960
360 768
-
4 783 728
-
90 291 779
35 000 000
The loan with the Swaziland Government (E 10 million) is for a 10 year period at 8% interest per annum
payable semi annually on 30 June and 31 December. The capital amount is payable in two instalments
of E5m on 30 June 2008 and 30 June 2013.
84 224 069
Furthermore, a loan amounting E 20 Million was obtained form the Central Bank of Swaziland. The
Corporation is to lend the money to deserving and potential and existing entrepreneurs. Interest is payable
at a fixed rate of 6.5% and paid half yearly whilst the capital shall be repaid in five annual instalments
of E 4 Million from 6 March 2008.
68
69
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
16 Borrowings (continued)
b)
16
The African Development Bank (ADB) in terms of which the bank will lend and advance E150 million
to the Government for the purposes of financing agricultural activities on the Komati Downstream
Development Project. For this purpose, the Swaziland Government shall advance E75 million to Swaziland
Development Finance Corporation. The loan shall be repaid over a period of 10 years. Interest payment
at 10.5% shall commence on 31 December 2005 whereas the payment of the principal shall commence
on 31 December 2006.
c)
The OPEC is a line of credit amounting to US $ 3 Million to Swaziland Development Finance Corporation.
Interest accrues from day to day and is pro rated on the basis of 360 days at the Margin plus LIBOR.
Repayment of the capital shall be made on the second anniversary of the first disbursement (07/11/2007)
to 7 November 2012.
d)
Tibiyo TakaNgwane loan facility amounts to E 10 Million. The loan is repayable over 9 years, and interest
shall be calculated annually at a variable prime lending rate charged by Standard Bank, and shall the prime
increase to 15%, anything above 15% the parties shall negotiate in good faith. Security shall be of a
notorial bond over all the borrowers’ present and future debtors. Total repayment shall not exceed E 15
Million.
Borrowings (continued)
The carrying amounts and fair value of the non
current borrowings are as follow:
Carrying
Fair
Amount
Values
E
E
30 000 000 31 403 565
44 229 600 49 306 618
18 447 000 18 399 936
500 000
537 928
1 898 907
1 898 907
OPEC Fund
Tibiyo TakaNgwane
Finance leases
95 075 507 101 546 954
e)
The fair values are based on discounted cash flows using a
discounted rate based upon the borrowing rate that the
directors expect would be available to the Corporation
at balance sheet date.
During the year, the Corporation increased its level of borrowing to finance the acquisition of 10 motor
vehicles through a finance lease facility. The lease liabilities are effectively secured as the rights to leased
assets revert to the lessor in the event of default.
2006
E
2005
E
Total finance lease liabilities
Current portion
1 898 907
(360 768)
-
Total non-current portion
1 538 139
-
The maturity of the non-current borrowing are as follows:
17
Reconciliation of minimum lease repayments to the present value of the finance lease liabilities:
Minimum
Lease
Finance
Present
Payments
Cost
Value
E
E
E
545 660 (184 892)
360 768
1 827 912 (289 773)
1 538 139
2 373 572 (474 665)
1 898 907
Between 1 and 2 years
Between 2 and 5 years
Over 5 year
2006
E
17 839 707 4 422 960
34 520 959 13 268 880
37 931 113 17 308 160
Non current portion
90 291 779 35 000 000
2005
E
Trade and other payables
Trade payables
Accruals
Interest payable
1 891 011
321 417
4 631 454
2 668 674
6 843 882
4 247 618
70
71
101 244
1 477 700
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
2006
E
Performance bonus
2005
E
Provision is made for payments in accordance with a bonus plan for the year ended 31 March 2006. The
bonus provision consists of a performance based bonus, which is determined by reference to the overall
Corporation performance with regard to a set of pre-determined key performance area. The cash flow
is expected to occur in 2006/2007 financial year when the results have been approved.
18 Taxation
Opening balance
Current year tax (refer note 6)
1 193 664
1 037 097
2 230 761
19 Provisions
Performance
bonus
Audit fees
31 March 2006 E
At 1 April 2005 Additional provision
Utilised during the year
At year-end
E
180 000
(85 000)
272 885
20 Derivative financial instruments
1 193 664
Leave pay
E
Total
E
713 433
654 125
798 433
1 107 010
(798 433)
85 000
272 885
-
773 183
420 481
(713 433)
180 000
654 125
During the year, the Corporation entered into a cross currency swap arrangement with Rand Merchant
Bank (RMB) to hedge against foreign exchange risk on its foreign currency based commitment with the
OPEC Fund for International Development.
The net fair value of derivative financial instruments at the balance sheet date and designated as fair
value hedge were:
2006
E
2 650 000
1 107 010
Cross currency swap
Audit fees
31 March 2005
At 1 April 2004
Additional provision
Utilised during the year
Leave pay
E
E
110 000
300 698
85 000
713 433
(110 000) (300 698)
At year-end
85 000
713 433
2005
E
-
Total
Cross Currency Swap
Cross currency swap agreement was entered into to manage exposure to fluctuations in foreign currency
exchange rate on the based commitment with the OPEC Fund for International Development. The
Corporation’s credit risk represents the potential cost to replace the swap contracts if counter parties fail
to perform their obligation.
E
410 698
798 433
(410 698)
At 31 March 2006, Borrowings included an amount of E 20 010 000 in respect of a long term loan due
in foreign currency, which has been hedged using the forward exchange contract stipulated above.
798 433
Leave pay provision
21
The leave pay provision related to vested leave pay to which employees are entitled. The provision arises
as employees render services that increases their entitlement to future compensated leave. The provision
is utilised when employees, who are entitled to leave pay, leave the employment of the Corporation or
when accrued entitlement is utilised.
This provision in respect of staff and employees calculated on the number of days that the employees have
not taken in respect of their leave entitlement. The anticipated utilisation of the amount provided is in the
near future.
Contingencies
Contingent liabilities
At 31 March 2006 the Corporation had contingent liabilities in respect of a bank guarantee arising out
in the ordinary course of business from which it is anticipated that no material liabilities will arise as the
liability will not crystallise. In the ordinary course of business, the Corporation has given guarantees
amounting to E1 522 500 (2005: E 1 522 500) to Swaziland Building Society in respect of staff housing
loans.
72
73
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
22 Commitments
Capital Commitments
Loan amounts contracted and approved for at the balance sheet date but not recognised in the financial
statements are as follows:
2006
E
Loan amounts approved but not disbursed
23
38 122 312 19 416 268
Current and future cash resources will fund the above
loan amounts.
Operating lease commitments –where the
Corporation is the lessee.
The future aggregate minimum lease payments under
non-cancellable operating lease are as follows:
Later than 5 years
378 000
1 994 543
2 372 542
235 530
-
Decrease in working capital
Increase in loans and advances (93 483 630)
(Increase)/decrease in other current assets
Increase in current liabilities
4 745 085
235 530
Net cash outflows from operating activities
During the year, May 2005, the Corporation entered into an operating lease agreement with Swaziland
National Provident Fund Properties. Operating rentals amounts to E 30 000 per month with an annual
fixed escalation rate of 6%.
24
2005
E
3 704 022
692 398
Cash utilised by operations
Cash flows from operating activities:
Profit for the period before taxation
Adjustment for non-cash items:
Depreciation
Provisions
Fair value loss
Loss on sale of fixed assets
2005
E
2006
E
10 954 192
289 116
393 575
1 249 358
215 095
9 978 963
16 805 358
11 355 780
271 954
412 465
-
(94 512 143)(30 289 607)
(34 960 330)
(3 539 777)
1 267 671
2 511 264
3 403 052
(77 706 785)(18 933 827)
Related party transactions
The Corporation is controlled by the Swaziland Government,
which own 70% of the Corporation shares. The remaining
30% of the shares are held by Tibiyo TakaNgwane,
in trust for the Swazi Nation.
The following transactions were carried out with
related parties.
(i)
Loan from related parties:
Tibiyo TakaNgwane
30 000 000
500 000
10 000 000
30 500 000
10 000 000
74
75
-
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
24 Related party transactions (continued)
The provision of funds to the Corporation by the Government of Swaziland is based on long term agreement
that enable Swaziland Development Finance Corporation Limited to obtain financing below the normal
market interest rate (prime lending rate). The Swaziland Government offer financing with interest rate
ranging between 6.5% and 8%, which is below the prime lending rate of 10.5%. Funding obtained from
Tibiyo TakaNgwane by the Corporation was at prime lending rate.
2006
(ii) Loan to the Managing Director:
Balance at beginning of the year
Capital adjustments
Interest accrued during the year
Loan repayments during the year
E
66 994
319 291
10 985
(50 160)
Balance at the end of the Period
347 110
2005
E
229 363
14 866
(177 235)
66 994
The loan was advanced to the Managing Director as a property
loan, repayable over 17 years, interest rate is based on the
Swaziland Building Society mortgage rate, which is currently
9.5%. The loan has been secured by a first mortgage bond over
the property in favour of the Corporation.
(iii)
Shangase Investment is a Corporation owned by the Managing
Director. A loan amount of E1.2 million was approved during
2005 by the Board of Directors for the Corporation to acquire
a property. The following amount was advanced during the year:
-
The loan was payable within six months from date of disbursement.
The loan has been fully repaid and the bond cancelled.
25 Financial guarantees
National Maize Corporation
Swaziland Dairy Board
Voluntary Deferred Pay Guarantee Fund
Komati Basin Water Authority
Shewula Account
Customer Deposit Account
Balance at the end of the Period
2006
E
248 162
1 572 596
2 703 512
500 000
30 547
101 764
(a)
(b)
(c)
(d)
(e)
(f)
5 156 581
2005
E
248 163
1 572 596
2 609 491
500 000
4 930 250
(a) National Maize Corporation Guarantee
Swaziland Development Finance Corporation Limited has agreed to administer loans to local maize
farmers. NMC will pay 8% of the total amount loaned by the Corporation as management fee at the end
of each season. NMC has agreed to provide up to E2 million as guarantee against these loans. The funds
are kept in a separate bank account called NMC Credit Guarantee Fund with interest accruing to the NMC
Fund.
(b) Swaziland Dairy Board
Swaziland Development Finance Corporation Limited has agreed to administer loans to smallholder dairy
farmers. SDB will pay 10% of the total amount loaned by the Corporation as management fee at the end
of each season. SDB has agreed to provide up to E1.5 million as guarantee against these loans. The funds
are kept in a separate bank account called SDB Credit Guarantee Fund with interest accruing to the SDB
fund. Swaziland Development Finance Corporation acts as signatories to this account.
Loan to Shangase Investment
Amount advanced
(iv)Doubtful debts
There is no provision for doubtful debts, nor any bad debt written off during the year, that relates
to related parties.
97 902
(c) Voluntary Deferred Pay Special Fund
In terms of a 5 year contract with VDPSF, Swaziland Development Finance Corporation Limited has
agreed to administer loans to qualifying ex-miners in order to enable them to engage in meaningful income
generating activities. VDPSF will pay 8% of the total amount loaned by the Corporation as management
fee at the end of each season. VDPSF agreed to provide E2.5 million as guarantee against these loans.
The funds are kept in a separate bank account called Voluntary Deferred Pay Guarantee Fund with interest
accruing to the VDPS fund.
76
77
CORPORATION LIMITED
CORPORATION LIMITED
BOARD OF DIRECTOR
DETAILED INCOME STATEMENT
25 Financial guarantes (continued)
2006
E
(d) Komati Basin Water Authority (KOBWA)
Swaziland Development Finance Corporation Limited has agreed to administer loans to communities in
the Peri Reservoir Area around the Maguga Dam in an effort to promote entrepreneurial development thus
strengthening the small enterprise sector. KOBWA will pay 10% of the total amount loaned by the
Corporation as management fee on a quarterly basis from the date of disbursement of the first loan.
KOBWA agreed to provide up to E0.5 million as guarantee against these loans. The funds are kept in a
separate bank account called KOBWA Scheme account with interest accruing to the KOBWA fund.
Swaziland Development Finance Corporation acts as signatories to this account.
(e) Shewula Account
The values reflected as Shewula funds in the Trial Balance refers to funds that were left by volunteers
from Italy to FINCORP on behalf of shewula people. These volunteers from Italy had come to the country
to help set up a certain project for the Shewula people. They could not finish this project and there were
funds remaining for the project. Realising that they could not give it to anyone there to oversee the
completion of the project, they decided to give the money to FINCORP to advance to people seeking to
start projects that will develop Shewula. So far no one has come up with a project to be advanced on in
that respect.
(f) Customer deposit Account
FINCORP sometimes requires that some projects be secured by a deposit. These deposit monies are then
banked with Swaziland Building Society in the clients name but with FINCORP holding the deposit book
and the withdrawal rights of the funds from Swaziland Building Society. After the client has settled the
funds are withdrawn and given to the client with interest. As at year end there were 43 sub-accounts
(clients) to the Customer Deposit Account.
INCOME
Interest receivable
Bad debts recovered
Sundry income
Foreign exchange gain
2005
E
32 351 426 21 302 490
471 840
1 211 047
1 400 642
570 197
519 062
-
35 434 955 22 391 749
EXPENSES
Advertising
Audit remuneration
Bank charges
Bad debts written off
Board expenses
Computer expenses
Consulting fees
Depreciation
Donations
Fair value adjustment on currency swap
Insurance
Interest expense
Legal fees
Loss on disposal of fixed assets
Magazines and subscriptions
Motor vehicle expenses
Printing and stationery
Repairs and maintenance
Rent, water and light
Salaries and wages
Security66 652
Sundry expenses
Telephone and postage
Training
Travelling and entertainment & International conferences
660 343
242 578
206 547
60 609
68 936
26 642
4 105
293 781
9 000
2 650 000
12 360 577
264 007
5 935 735
54 722
59 765
135 310
399 467
226 526
22 086
558 410
5 453 181
55 388
433 605
487 669
862 742
187 938
Total expenses
31 730 933 21 402 610
101 281
103 200
145 207
2 918 400
80 833
57 585
271 954
9 978 963
153 802
1 521 705
188 961
141 935
304 870
73 869
19 034
235 529
4 102 303
60 653
200 492
58 913
627 733
Profit before taxation
3 704 022
989 139
Taxation
(955 506)
(296 741)
Profit for the year
2 748 516
692 398
78
79
CORPORATION LIMITED
CORPORATION LIMITED
ANNUAL FINANCIAL STATEMENTS (GRAPHS)
BOARD OF DIRECTOR
TAXATION SCHEDULE
2006
E
Loans by Sector 31 March 2005
1%
Micro loans
Dressmaking/tailoring & knittings
19%
Profit before tax
3 704 022
Exempt income
Dividend from Swaziland Building Society shares
Grocery and vegetables
1%
0%
0%
1%
0%
1%
0%
(519 000)
Handigraft
Hawking
Heavy haulage
4%
69%
Other Agricultural actvities
Temporary differences
General business
4%
0%
Poultry
Sugar cane farming
Add back: Provision for leave pay 2006
Provision for performance bonus 2006
Interest on leases
Depreciation on leases
Deduct:
654 125
Transport services
272 885
Provision for lease pay 2005
Lease payments
82 875
198 723
(713 433)
(223 206)
Loans by Sector 31 March 2006
2%
Micro loans
Dressmaking/tailoring & knittings
23%
Grocery and vegetables
Taxable income
3 456 991
Handigraft
Hawking
Heavy haulage
1%
2%
Taxation at 30%
1%
15%
15%
1 037 097
Other Agricultural actvities
General business
15%
Poultry
Sugar cane farming
15%
15%
Transport services
15%
Loans Approved per Year
200.000
180.000
160.000
Hhohho
Value E’000
140.000
120.000
Manzini
100.000
80.000
Lubombo
60.000
Shiselweni
4.000
Total
2.000
1999
2000
2001
2002
2003
2004
2005
Year
80
81
2006
CORPORATION LIMITED
CORPORATION LIMITED
ANNUAL FINANCIAL STATEMENTS (GRAPHS) cont.
PORTIFOLIO
250.000
Value E’000
200.000
150.000
Gross Portfolio
Impairment
Net Portfolio
100.000
50.000
1999
2000
2001
2002
2003
2004
2005
2006
Year
31-Mar-05
31-Mar-06
28%
55%
72%
45%
Debt
Debt
Equity
Equity
Total Income VS Total Expenses
40.000
35.000
Value E’000
30.000
25.000
Total Income
20.000
Expenditure
15.000
10.000
5.000
1999
2000
2001
2002
2003
2004
2005
2006
Year
01
82

Fincorp Annual

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