Estate Agency Affairs Board ANNUAL REPORT AND FINANCIAL STATEMENTS 2013/2014 Bryan Chaplog (CEO) Silence Mmotong (CFO) Nikita Sigaba (CRO)

 Mandate  Vision & Mission  Organizational Structure  Corporate Governance Report  Operational Report  Integrated Human Capital Report  Annual Financial Statements  Performance Information Report  Audit Report  Year Ahead PRESENTATION OVERVIEW

Primary Mandate of EAAB  Regulate, maintain and promote the standard of conduct of estate agents having due regard to the public interest;  Issue fidelity fund certificates to qualifying applicants;  Prescribe the standard of training of estate agents;  Investigate complaints against estate agents and institute disciplinary proceedings against offending estate agents where required; and  Manage and control the Estate Agents Fidelity Fund. Secondary mandate  The EAAB is the Supervisory Body of the estate agency profession pursuant to the Financial Intelligence Centre Act and is obliged to take all steps required to prevent; alternatively, identify and report on, anti-money laundering and terrorist financing activities MANDATE

VISION & MISSION VISSION To be a world class regulator that is responsive to and surpass its stakeholder expectation MISSION To ensure that the integrity of the transaction between the estate agent and consumer is of a high standard by regulating, protecting, guiding and enhancing the conduct of real estate agents’ profession in South Africa.

Executive Authority DHS Board Members Chief Executive Officer Executive Compliance Claims Disciplinary Litigation and Recoveries Audit Complaince Registration Executive Inspections Inspections 9 Regional Offices Executive Education and Training Professional Body Estate Agents Education and Training Knowledge Centre and Library Executive Corporate Services (CFO) Human Resources Information Technology Finance and Administration Customer Relations Agents Marketing and Publications Property Consumer Awareness Legal Technical Analyist Business Operation Executive Chief Risk Officer Company Secretary Internal Audit (outsourced) Transformation Manager

CORPORATE GOVERNANCE REPORT BOARD COMPOSITION Executive Authority = Department of Human Settlements Accounting Authority = Board (15 Board Members)  5 members representing estate agents industry  5 members from civil society representing the interest of consumers  5 members from related professions and institutions such as legal, financial, property owners

CORPORATE GOVERNANCE REPORT BOARD COMMITTEES Chairman’s committee (10 members) Audit and Risk Committee (6 members) Finance Committee (5 members) HR and Remunerations Committee (6 members) Education & Training Committee (6 members) Legal and Claims Committee (6 members) Social and Ethics Committee (6 members) Transformation Committee (7 members)

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INSPECTIONS STATISTICS NON-COMPLIANCE: INSPECTION CONTRAVENTIONS 2013/14 GautengWestern Cape LimpopoFree StateEastern Cape KwaZulu Natal MpumalangaTotal ESTATE AGENCIES OPERATING ILLEGALLY PRINCIPALS - NO FIDELITY FUND CERTIFICATE NON-PRINCIPALS AND INTERNS - NO FIDELITY FUND CERTIFICATE PRIMARY TRUST ACCOUNT CONTRAVENTIONS SECONDARY/INVESTMENT ACCOUNT CONTRAVENTIONS INTEREST EARNED ON TRUST MONEY - NOT PROPERLY DEALT WITH OPERATIONAL OVERVIEW

INSPECTIONS STATISTICS NON-COMPLIANCE: INSPECTION CONTRAVENTIONS 2013/14 GautengWestern Cape LimpopoFree State Eastern Cape KwaZulu Natal MpumalangaTotal RETENTION OF TRUST MONIES AND PAYMENTS FROM THE TRUST ACCOUNT INSUFFICIENT ACCOUNTING RECORDS OF TRUST ACCOUNT IMPROPER ADMINISTRATION OF TRUST ACCOUNT ACCOUNTING RECORDS IMPROPERLY MAINTAINED CONTRACTS COMPLETED BY UNQUALIFIED PERSONS CONTRAVENTIONS OF THE CODE OF CONDUCT IN RESPECT TO CONTRACTS GENERALLY OPERATIONAL OVERVIEW

INSPECTIONS STATISTICS NON-COMPLIANCE: INSPECTION CONTRAVENTIONS 2013/14 GautengWestern Cape LimpopoFree StateEastern Cape KwaZulu Natal MpumalangaTotal CONTRAVENTIONS OF THE CODE OF CONDUCT IN RESPECT TO SOLE MANDATES CONTRAVENTIONS OF THE CODE OF CONDUCT IN RESPECT TO LEASE AGREEMENTS CONTRAVENTIONS OF THE CODE OF CONDUCT IN RESPECT TO SALE AGREEMENTS CESSATION OF PRACTICE WITHOUT NOTIFYING THE EAAB NON-EXISTANT ESTATE AGENCIES OPERATIONAL OVERVIEW

INSPECTIONS STATISTICS NON-COMPLIANCE: INSPECTION CONTRAVENTIONS 2013/14 GautengWestern Cape LimpopoFree StateEastern Cape KwaZulu Natal MpumalangaTotal NON-COMPLIANCE WITH THE FIC ACT iro DUTY TO IDENTIFY CLIENTS AND KEEP RECORDS NON-COMPLIANCE WITH THE FIC iro CASH THRESHOLD REPORTING IN TERMS OF TRANSACTIONS EXCEEDING R NON-COMPLIANCE WITH THE FIC iro INTERNAL RULES NON-COMPLIANCE WITH EAAB EDUCATION REQUIREMENTS FAILURE TO UPDATE GENERAL INFORMATION WITH THE EAAB TOTAL CONTRAVENTIONS TOTAL INSPECTIONS OPERATIONAL OVERVIEW

EDUCATION AND TRAINING OPERATIONAL OVERVIEW

EDUCATION AND TRAINING OPERATIONAL OVERVIEW

Employment and vacancies Programme 2012/13 No. of employees 2012/14 Approved posts 2013/14 No. of employees 2013/14 Vacancies CEO’s Office3972 Compliance Education and Training7770 Corporate Services Total INTEGRATED HUMAN CAPITAL REPORT

Employment equity status (Male) AFRICAN MALECOLOURED MALEINDIAN MALEWHITE MALE Skills levelEmployeeEE TargetEmployeeEE TargetEmployeeEE TargetEmployeeEE Target Top Management Senior Management Professional Qualified Skilled Semi-skilled Unskilled Total INTEGRATED HUMAN CAPITAL REPORT

Employment equity status (Female) AFRICAN FEMALECOLOURED FEMALEINDIAN FEMALEWHITE FEMALE Skills levelEmployeeEE TargetEmployeeEE TargetEmployeeEE TargetEmployeeEE Target Top Management Senior Management Professional Qualified Skilled Semi-skilled Unskilled Total INTEGRATED HUMAN CAPITAL REPORT

ANNUAL FINANCIAL STATEMENTS 2013/ /13 R % R'000 Change R’000 Change INCOME STATEMENT Income (2 547) -3% Revenue - FFC (2 383) -13% Revenue - Management Fee (730) -1% Revenue - Examinations % Other Income (1 224) -11% Expenses (74 612) (93 538) % Operating Expenditure (34 243) (41 516) % Depreciation and Impairments (2 348) (366) (1 982) 542% Auditors Remuneration (1 461) (1 666) % Employee Costs (36 560) (49 990) % Operating Surplus (Deficit) (10 479) % Investment Income (2 892) -50% Finance Costs - (3) % Net Surplus/(Deficit) (4 711) %

ANNUAL FINANCIAL STATEMENTS TRENDS Income  Revenue from issue of FFC declined due to some estate agents still battling with complying with audit report requirements  Revenue from exams increased due to more estate agents enrolling for exams to meet the regulations deadline

ANNUAL FINANCIAL STATEMENTS TRENDS Expenditure  Operating expenditure decreased due to less inspections performed  Staff costs decreased due to recoupment/reversal of the losses in the pension fund scheme

ANNUAL FINANCIAL STATEMENTS 2013/ /13 R'000 % BALANCE SHEETR'000 Change Property, Plant and Equipment % Intangible Assets % Inventories % Loan Fund - Fidelity Fund % Financial Assets/Investments (26 095) -95% Trade and other Receivables % Bank and Cash (51 164) -60% Total Assets % Capital and Reserves % Current Liabilities % Non-current Liabilities (12 396) -60% Total Equity and Liabilities %

ANNUAL FINANCIAL STATEMENTS RATIOS RATIO ANALYSIS 2013/ /13 Return on net Assets (%)8% (5%) Current Ratio 2 6 Debt collection rate (Days)18 6 Creditors Payment rate (Days)51 17 Gearing/Financial Leverage23% 29%

ANNUAL FINANCIAL STATEMENTS FIDELITY FUND 2013/ /13 Net Asset Value (NAV)R571 Million R580 Million Claims ApprovedR5.8 Million R0.288 Million Claims approved as a percentage of NAV1% 0.05%

KEY PERFORMANCE ANNUAL TARGETS – PROGRAMME 1: COMPLIANCE Strategic Objectives  To improve compliance with the Estate Agency Affairs Act. SUB PROGRAMMES OUTPUTS Actual Achieveme nts 2012/2013 Planned Targets 2013/2014 Actual Achievemen ts 2013/2014 Deviation from planned target to Actual Achievement for 2013/2014 (under)/over performance Comment on deviations below target. Disciplinary Number of complaints received investigated and resolved (466) The enforcement department was only adequately resourced in the 1st Quarter. The enforcement department was focused on late or no audit report submission prosecutions instead of complaints in the 4th Quarter. Inspection Number of inspections performed (410) The inspection department was under-capacitated for the first 3 quarters. Licensing Number of new registration FFC issued N/A Number of renewals FFC issued (19423)EAAB was more stringent in supplying Fidelity Fund certificates to Estate Agents which did not submit their Audit reports on time.

KEY PERFORMANCE ANNUAL TARGETS – PROGRAMME 2: CORPORATE SERVICES Strategic Objectives  To increase stakeholder awareness of the EAAB and its stakeholders  To effectively and efficiently manage the EAAB SUB PROGRAMMES OUTPUTS Actual Achievements 2012/2013 Planned Targets 2013/2014 Actual Achievements 2013/2014 Deviation from planned target to Actual Achievement for 2013/2014 (under)/over performance Comment on deviations Stakeholder awareness Consumer awareness campaigns performed (3) Lack of capacity to perform adequate consumer campaigns. Estate Agency capacity building campaigns performed N/A Number of agent magazine issued N/A Automation of registration process Number of on- line registrations performed (189)Inadequate awareness in the use of on-line registrations.

KEY PERFORMANCE ANNUAL TARGETS – PROGRAMME 3: FIDELITY FUND Strategic Objectives  To improve the sustainability of the Fidelity Fund. SUB PROGRAMMES OUTPUTS Actual Achievements 2012/2013 Planned Targets 2013/2014 Actual Achievements 2013/2014 Deviation from planned target to Actual Achievement for 2013/2014 Comment on deviations Fidelity Fund Growth Value of claims approved R1,925,000 Maximum of R4,000,000 R3,051,254 R948,746N/A Interest received from Estate Agents Trust account R10,507,000R20,000,000R17,085,869(R2,914,131) This is due to lower renewals than expected. Value of claims recoveries R1,925,000R2,000,000R0(R2,000,000) The Litigation & Recoveries department was under-capacitated for most of the financial year Interest received from investments R30,384,000R32,000,000R31,277,029 (R722,971) Decrease in Fidelity Fund Investments has resulted in lower return on investments. Fidelity Fund Growth 2.2% Fidelity fund Growth 5.4% Fidelity Fund Growth 0.014% Fidelity Fund Growth (5.386%)Fidelity Fund Income grew below expectation and Expenditure was higher than expected.

KEY PERFORMANCE ANNUAL TARGETS – PROGRAMME 4: EDUCATION AND TRAINING Strategic Objectives  To build capacity of key stakeholders SUB PROGRAMMESOUTPUTS Actual Achievement s 2011/2012 Planned Targets 2013/2014 Actual Achievements 2013/2014 Deviation from planned target to Actual Achievemen t for 2013/2014 Comment on deviations Education and Training Number of NQF Level 4 candidates enrolled and passed PDE N/A. Education and Training Number of NQF Level 5 candidates enrolled and passed PDE N/A Education and TrainingNumber of candidates enrolled for the CPD (1500)The selection of CPD system service provider has taken longer than expected. The cost of procuring the service is higher than expected and therefore required a tender process.

AUDIT REPORT AUDIT OPINIONUNQUALIFIED AUDIT OPINION EMPHASIS OF MATTERNONE LEGAL AND REGULATORY MATTERS Reportable Irregularity – 3 disqualified board members not vacated their office. They have since vacated their office PREDETERMINED OBJECTIVES56% targets not achieved as they did not meet the SMART criteria Performance Information System not Integrated with Financial and Reporting Management Systems

AUDIT REPORT JOURNEY 2009/10 – Unqualifie d Audit Opinion 2010/11 - Unqualified Audit Opinion 2011/12 – Unqualifie d Audit Opinion 2012/13 - Unqualifie d Audit Opinion 2013/14 Unqualifie d Audit Opinion

YEAR AHEAD KEY PLANS FOR 2014/2015  Establish regional centers  Participate in finalizing the Property Practitioners Bill  Intensify the consumer awareness campaigns  Increase inspections

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