1. 1 5 Year Financial Plan : 2008 – 2012 Presentation to Senate by Hollie Clarkson Acting Chief Finance Officer Wednesday 9 April 2008

2. 2 2007.... A re-cap.... italisation ! Achievements..... Sustained guidance from the Budget Working Group Adoption of Budgeting Framework Development of Resource Allocation Model 2007 Annual Operating Budget : “A manageable deficit” Presentation to Council of inaugural 5 Year Institutional Financial Plan Establishment of Physical Planning Committee Merger-related Capital Infrastructure : +- R500 million New Westville Residences : +- 900 students A consolidated surplus in excess of R100 million Research-related revenue exceeded student fee income

3. 3 What did we not achieve? A “breakeven” operating budget Optimum overhead recoveries A significant yield from third stream income Formal adoption of a consolidated Residences budget A comprehensive capital expenditure budget A widespread understanding of the RAM Adequate support for financial management Regular reviews and revisions of the Main Fund Budget A functional MISB Reliable and timely management accounting Satisfactory fee and general collections 2007.... A re-cap.... italisation !

4. 4 UKZN.... Some of the challenges Student Enrolment Planning Access and Affordability : Student admissions, including provision of adequate and affordable accommodation Student Financial Aid : Scholarships, bursaries and loans Student Fee Debtors : Collections and improving cash flow management Development of sustainable sources of third stream income, innovation and (capital) endowment funds Resource Allocation Issues : Strategic vs operational 5 Year Financial Plan : 2008 - 2012

5. 5 UKZN.... Some of the challenges (continued) Capital expenditure needs : proper planning, prioritisation and life cycle financing Putting the “balance” back into the UKZN balance sheet, i.e. restoration of solvency margins, positive funds (Council controlled) and improved liquidity ratios Personnel costs : Academic salaries and productivity. To develop and implement an appropriate reward system Working towards and achieving targeted expenditure levels in terms of DoE prudent guidelines Multiple Campus facilities, expenditure efficiencies and need for benchmarking and adoption of “Best Practice”, especially in administrative support services 5 Year Financial Plan : 2008 - 2012

6. 6 Planning Imperatives : Revenue Main (Operating) Fund financial viability within 3 to 5 years Sustainable operating surpluses Significant contribution from third stream income Adherence to prudent expenditure guidelines Affordable loan-funded capital expenditure 5 Year Financial Plan : 2008 - 2012

7. 7 Planning Parameters : Expenditure Annual budget allocations based on Resource Allocation Model Contractual liabilities represent “top slices” from Resource Base : Council approved and centrally controlled, i.e. statutory obligations, conditions of service or debt service obligations Strategic Appropriations largely historic in nature and should be reviewed regularly, at least annually by all stakeholders Need to finance University Strategic Plan (+-R365m), in part from annual Revenue budget DoE prudent expenditure guidelines represent targets for major components of operating expenditure, i.e. personnel costs, goods and services, finance costs and depreciation Amount available for Capital expenditure budget depends on debt service capacity (Council-imposed threshold of 3% per annum) 5 Year Financial Plan : 2008 - 2012

8. 8 5 Year Financial Plan : 2008 – 2012 Prudent DoE Budget Guidelines Acceptable Ranges UKZN 5 Year Plan %20072012 Personnel57,563,068,161,0 Goods & Services32,029,034,828,0 Finance Costs3,02,50,73,0 Depreciation6,54,54,85,8 Surplus/ (Deficit) 1,0 (8,4) 2,2 TOTALS100,0

9. 9 5 Year Financial Plan : 2008 – 2012 Prudent DoE Budget Guidelines

10. 10 Planning Principles : Capital Expenditure Priority to capital maintenance backlogs and compliance with safety, health and environment (“SHE”) requirements (+- R70m) Standby Generators (+-R13m) to be installed shortly Proposed 5 Year Capital Expenditure Programme (R638m) to be phased in and financed by external borrowings Approximately 45% of total capital requests from 2008 to 2012 can currently be planned, based on anticipated borrowing and debt service capacity Responsibility for prioritisation and allocation to be delegated to Resource Planning Committee and sub-groups 5 Year Financial Plan : 2008 - 2012

11. 11 YearTotal Capital Requested Percentage Proposed Total Proposed Budget R’m% 200851950259 200939850199 20101754070 20111444058 20121733052 Total1 40945638 5 Year Capital Expenditure Programme : 2008 - 2012

12. 12 5 Year Capital Programme : Cumulative Expenditure 2008 - 2012 R million

13. 13 2008.... The way forward........ A Sustainable Financial Plan for UKZN What will we achieve? A better and more widespread understanding of the RAM Benefit of experience with the new RAM...... Ewe be the judge! Development of a 5 Year “Rolling” Revenue Budget Progress towards reducing the Main Fund operating deficit A comprehensive and properly financed 5 Year Capital Budget A consolidated Residences Budget

14. 14 2008.... The way forward........ A Sustainable Financial Plan for UKZN What will we achieve? Finalisation of the Merger-related Infrastructural Programme Full devolution of budgetary control and responsibility A functional and effective MISB.... No Misbevaviour! Efficient Financial management support services Continued growth in Research-related revenue Development of meaningful and sustainable third stream income?

15. 15 5 YEAR INCOME PROJECTIONS : 2008 - 2012 R’Million

16. 16 5 YEAR EXPENDITURE PROJECTIONS : 2008 - 2012

17. 17 NET SURPLUSES / DEFICITS : 2007 - 2012

18. 18 UKZN.... What If.... ? We do not achieve our Student Enrolment Plan? Funding for Student Financial Aid, i.e. scholarships, bursaries and loans, is not forthcoming? Debtors do not pay their fees on time (or at all) and bad debt write-offs increase? Budgeted sources of third stream income, innovation and (capital) endowment funds do not materialise? Targeted reductions in personnel costs and operating expenses are not reached? 5 Year Financial Plan : 2008 - 2012

19. 19 5 YEAR INCOME PROJECTIONS : 2008 - 2012 A potential loss of income of +- R892 million in the 5 years from 2008 to 2012 R’Million

20. 20 5 YEAR EXPENDITURE PROJECTIONS : 2008 - 2012 A potential increase in total expenditure of +- R444 million in the next 5 years (2008 to 2012)

21. 21 NET SURPLUSES / DEFICITS : 2007 - 2012

22. 22 NET SURPLUSES / DEFICITS : 2007 - 2012

23. 23 “If you have built castles in the air, Your work need not be lost; For that is where they should be. Now put the foundations under them!” (With acknowledgement to Henry David Thoreau) Thank you