Annual Report 2010/2011

Select Committee on Finance

30 May 2012

Olaotse Matshane MD: CBDA

Contents

Establishment and Mandate of the CBDA

Co-operative Banks Supervision Report

Capacity Building and Information Report

Status of the CFI sector

Report of the Audit Committee

Financial Statements 2010/11

Establishment of the CBDA

In 2007 Co-op Banks Act passed

First Board appointed in August 2008

Operations commenced 2009 with

appointment of the MD - March 2009

(resigned March 2011),

Supervisor appointed May 2009.

Mandate of the CBDA

Establishment of the CBDA - Section 54 (1)

Mandate – section 55 (1)

– Support, promote, develop cooperative banks

(incl deposit taking co-ops)

– Appoint a supervisor

– Promote establishment of (+ register & regulate)

representative bodies

– accredit and regulate support organisations

CBDA Organogram 2010/11

BOARD

PART TIME PROVIDERS

VACANT

RESEARCH, M&E

MANAGING DIRECTOR

Sharda Naidoo ( Mar 09 – Mar 11)

PERCY MOLOKOANE

PROGRAMME

ADMINISTRATOR

ROSSETA XABA

FINANCE

KHANYISO MANJEZI

HUMAN

RESOURCES ( (NT)

ROBERT MBEZA

CAPACITY BUILDING

DAVID DE JONG

SUPERVISION & REGULATION

TIMOTHY MUTYAVAVIRI

CB OFFICER

NOMADELO SAULI

DEPUTY CAPACITY BUILDING

MC KUHLEGISA

SENIOR EXAMINER

MOKGADI MAFOJANE

TEAM ASSISTANT

Vacant

Vacant

Co-op Banks Supervision Report

Strategic Goals and Objectives

Register and Supervise Co-op Banks

Ensure Appropriate Regulatory Framework

Handling Troubled Co- operative Banks

Register & Supervise Co-op Banks

Maintaining processes for early screening of

licensing applications

Evaluate applications of proposed co-op banks

- as at 31 March 2011 – 18 CFI’s eligible to apply

for registration (see page 16 of the Annual Report)

- February 2011 – Ditsobotla registered as 1st Co-op

Bank

Carry out scheduled and targeted onsite

examinations

Off-site analysis of Co-op Banks

Compliance & Review of Legislative Frameworks

Guidance notes – published to provide

guidelines to applicants

Regulatory & oversight Advisory Committee

– Joint committee - SARB supervisor, CBDA

supervisor & MD, Registrar of Cooperatives

– To review & develop policy & legislation, co-

ordinate efforts between supervisors, the

Registrar & CBDA

– Has reviewed unintended consequences &

possible amendments to the Act, minimum reg

requirements etc.

Compliance & Review of Legislative Frameworks….

Regulation and Rules – published

Institutional relationships with stakeholders

– FSB, FIC, NCR, Samaf (now sefa), SACCOL,

PASA, the dti

Participation in national & international regulatory

and supervisory forums

Annual co-operation & co-ordination plan

Capacity Building & Information Report

Strategic Goals and Objectives

Assemble an effective capacity building team

Understand existing CFI sector in depth

Support, promote & develop Co-op banks incl.

deposit taking Co-operatives

Accessible programmes to meet sector learning

needs

Implement a CFI development monitoring system

Assemble an effective capacity building team

Team – Director + 2 technical staff assigned

to:

– Develop accredited training materials

– develop capacity building tools

– Facilitate workshops

– Provide technical assistance to CFIs

– Release publications

Understand existing CFI sector in depth

Skills level Percentage (%)

University qualifications 15

College diploma 32

High school as their highest level education 53

Professional qualifications in Information Technology 3

Fairly new and have not attended any CFI related

training

67

Lack knowledge in the management of financial co-

operatives

57

Support, promote & develop Co-op

banks incl. deposit taking Co-operatives

Services providers appointed to develop

– Standardised manual accounting system

– Governance training materials

Implement a CFI Development

Monitoring system

On-site technical assistance provided to CFIs

CBU assisted CFI’s with the review and

development of new strategic plans

Capacity Building guidance committee

– CBDA, samaf, SACCOL, DGRV, and BANKSETA

– Ensure coordinated & comprehensive apprach to

education and training in the sector

CBDA & BANKSETA – coordinated a training

programme for CFI staff and board members

Status of the CFI sector

Emerging observations:

– Weak and inadequate capital levels

• Sector CAR of a low 2% over the past four years

• Dividend payments regardless of weak capitalisation

– Weak governance structures

• Majority of CFIs not holding AGMs

• ‘Permanent’ board members (with some boards

having an average age of 77, and been on board for

15 years)

• Existing boards lack adequate training

• Boards lack understanding of financial co-op model

Status of the CFI sector…

Inadequate credit risk management practices

– FSCs conservative lending i.e. FSC loan portfolios make

up less than 5% of total assets

– SACCOs aggressive lending i.e. loan portfolios average

77% of total assets

– No credit committees to provide oversight over lending, &

inadequate loan policies in place

– Inadequate capabilities in monitoring & managing

delinquent loans, including bad debts write off

Status of the CFI sector…

Weak operational capacity

- Existing credit & savings policies are out-dated/not

implemented

- Use of manual paper based systems

- Inadequate skills as reflected in the following skills

assessment conducted by the CBDA:

Status of the CFI sector…

Reporting on financial performance – FSCs do not produce conventional financial statements

(tend to report for grant funding purposes)

– SACCOs not consistent in reporting to SACCOL

– Absence of required experience and qualifications on

basic accounting skills

– Unaudited financial statements & where audited, auditors

do not understand financial co-operative model

– Sector not prioritised by auditors resulting in late

production of financials (in most cases 12 months late)

Annual Financial Statements 2010/11

- Report of the Audit Committee

- Report of the Auditor General

Report of the Audit Committee

Internal controls adequate to ensure reliable

financial records

Financial statements prepared on the basis

of appropriate accounting policies

Financial statements comply with the

relevant provisions of the PFMA

Report of the Auditor General

Unqualified report for the CBDA

Emphasis of matter

- Irregular Expenditure

- Fruitless and Wasteful Expenditure

Compliance with Laws & Regulations – Procurement & contract management

• Supplier and tax clearance certificates

– Strategic planning & performance management

• Approval of the strategic plan

• No Fraud Prevention Plan

• Submission of quarterly reports on performance

– Cooperative Banks Act

• No Deposit Insurance Fund

– Internal Control

• No significant deficiencies

Statement of Financial Position

Assets 2011 (R’000)

Non –current assets

Property, plant and equipment 100

Intangible assets 6

Current Assets

Cash and Equivalents 31

Trade and receivables 19

Total assets 156

Liabilities

Current liabilities

Trade and other payables 804

Provisions 133

Total liabilities 937

Net Assets

Accumulated deficit (781)

Total net assets and liabilities 156

Statement of Financial Performance

Revenue 2011 (R’000)

Transfers and subsidies 8,200

Sale of goods and rendering services 35

Interest, dividends and rent on land 43

8,278

Expenditure

Goods and services (4,677)

Compensation of employees (3,947)

Deprecation/amortisation and impairment (52)

(8,676)

Deficit for the year (398)

Conclusion

The CBDA has opportunity to support this sector and ensure its sustainability and viability

Sector is showing definite growth

Need to ensure it is regulated and does not put depositors funds at risk.

THANK YOU