2025
Professional Competence
Development Programme
INTRODUCTION TO PROFESSIONAL
COMPETENCE
CASE STUDY 1: DOCUMENT 5
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OVERVIEW OF DOCUMENT
Document 5 provides the expectation tables, grading grid and specimen response to the tasks b,
c and d outlined in document 3 (PRI) and document 4 (IOD and Tasks).
OBJECTIVE OF DOCUMENT 5
 The primary objective of Document 5 is to focus on the grading process and assess your
performance. This entails gaining a deep understanding of the expectation tables within
the context of grading, actively engaging with the Grading Grid and Specimen Response.
Furthermore, the objective is to critically evaluate your performance in tasks b, c and d as
submitted in Quiz 5, identifying both areas of strength and areas requiring improvement in
a professional manner.
Instructions for document 5
▪
▪
▪
▪
▪
Read and actively engage with expectation tables, grading grid and specimen
response.
Watch the recorded video on the assessment of professional competence.
Attend the workshop 4 dealing with the responses to the task b, c and d.
Grade your attempt and submit your grading as part of quiz 5 submissions together
with the reflective questions posed below:
o What role do the expectation tables play within the grading process?
o What is the purpose of a grading grid?
o Is it necessary for your responses to encompass all aspects outlined in the
specimen responses? Provide reasoning for your answer.
o Reflect on your performance in your response to task b, c and d, identifying areas
of strength and areas for improvement, and how your preparation or how you have
dealt with the information on the day assisted you or failed you in your responses.
o Reflect on how you plan to enhance your responses based on the points requiring
further improvement. Specifically, how your preparation and how you have dealt
with the information on the day can be improved. Additionally, highlight areas
where your preparation and how you have dealt with the information on the day
enabled you to meet expectations regarding your responses, and which you hope
to continue to do.
o Attempt quiz 5 by 22 May 2025 in the LMS.
To-do
o Refer to Guidance Video 5 for detailed guidance on approach to Document 5.
o Watch the recorded video on the assessment of professional competence.
o Grade your attempt.
o Complete Quiz 5 in response the questions posed above and submit your grading by
the due date of 22 May 2025.
o Attend Workshop 4 on either the 20th or the 22nd of May to refine your understanding
of the grading process.
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GRADING GUIDE FOR TASKS B C AND D
Candidate Number APC
Surname
Firm/Course
First Name
OVERALL ASSESSMENT OF COMPETENCE
No attempt
(NA)
Not
competent
(NC)
Limited
competence
(LC)
Borderline
competent
(BC)
Competent
(C)
Highly
competent
(HC)
Disclaimer: All names of persons, places, and business entities mentioned in this case study are purely fictitious in
nature and any resemblance to real people, living or dead, places or business entities are purely coincidental.
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Task (b)
Primary indicators of competence
All (TAX) unless otherwise stated
• Questions the accuracy of the tax base of properties given section 13
quin (only new and unused buildings acquired after 2007)
• Questions whether own offices are classified as PPE or investment
property – affects ‘tax rate’ [AER]
• Explains that the CGT rate should be used to calculate deferred tax
on investment properties (above acquisition cost) under the rebuttable
presumption of IAS 12.51C [AER]
• Considers international tax implications, e.g. different Zambian tax
rate, source rules, DTAs, etc.
• Questions tax base of office equipment given wear & tear allowances
• Explains that the temporary difference on goodwill is exempted
under IAS 12.15(a) [AER]
• Agrees with the tax base of zero for operating lease assets
• Considers deductibility of allowance for credit losses (section 11(j))
to determine tax base
• Questions the tax base of the deposits received – possibly income
received in advance
Communication skills
• Commentary is constructive/not unduly critical (reviewing work of a
junior)
Indicators of higher level application
• Identified that a potential loss of control over the Zambian
subsidiary might affect deferred tax (goodwill impairment, investment
property, investment in associate/JV) [AER]
• Debates whether deferred tax should be recognised on the FCTR
[AER]
• Questions the reasonableness of tax base of investment property given
that section 13quin only applies to acquisition cost of new and unused
buildings, excludes land cost and fair value adjustments [P]
• Questions the tax base of trade receivables given the bad debts
allowance [P]
• Questions whether the correct rate (25% versus 40%) used for the
purposes of section 11(j)
• Considers the potential impact of section 23H on prepayments
possibly included in trade and other receivables
• Advises that trade and other payables may include items that
create temporary differences e.g. accruals deductible when paid in
cash section 11(a)
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Depth
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No attempt
(NA)
Task (b) - Assessment of overall competence
Not
Limited
Borderline
Competent
competent
competence
competent
(C)
(NC)
displayed (LC) (BC)
Highly
competent
(HC)
Task (b) – Commentary
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Task (c)
Primary indicators of competence
All (FM) Unless otherwise stated
• Discusses whether acquiring a property in Pretoria CBD is consistent
with PropCo strategy [P]
• Identifies that vacancies forecast to decline, contrary to recent trends
[P]
• Discusses the reasonability of forecast rental income and property
expenses [P]
• Discusses whether R100m over-valued, appropriate cap rate
used? /obtain an expert to value property
• Recommends that taxation be included in the forecast cash flows
• Discusses whether the financing aspects of the property acquisition
should be included or excluded from the analysis
• Identifies that working capital forecasts have been excluded from
forecasts
• Questions how R135.7m exit value was obtained?
• Mentions the requirements of section 75 (disclose &
recuse)/discusses conflict of interest [SRMG]
Communication skills
• Clarity of expression
Indicators of higher-level application
• Evidence of appropriate pre-research e.g. SAPOA reports etc. [P]
• Identifies that the property has been valued using a cap. rate of 7.8%
versus PropCo’s cap. rate of 9%
• Identifies that the potential exit value in 2030 was derived using a
9% cap. Rate
• Suggests that CGT should be deducted from potential exit proceeds
in 2030 [P]
• Questions whether the property would require repairs &
maintenance/capex [P]
• Recommends that sensitivity analysis should be performed on the
forecasts and the potential impact on IRR
• Recommends that the potential IRR be compared to PropCo’s hurdle
rate/cost of capital
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No attempt
(NA)
Task (c) - Assessment of overall competence
Not
Limited
Borderline
Competent
competent
competence
competent
(C)
(NC)
displayed (LC) (BC)
Highly
competent
(HC)
Task (c) – Commentary
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Task (d)
Primary indicators of competence
All (SRMG) Unless otherwise stated
• Identifies the intimidation threat re appointment as a trustee
• Recognises that the current funding model is unsustainable. [P]
• Identifies the lack of independence/conflict of interest/objectivity of
trustees
• Expresses concern about the recordkeeping of the trust
• Questions whether the R100k payment to Rohlihlala for administering
bursary allocations is appropriate.
• Questions whether the bursary allocation process is robust enough
– lack of paper trail concerning.
• Recognises the importance of monitoring the academic performance
of bursary students. [P]
• Identifies concerns around the appointment of the proposed
auditors (e.g. existing relationship with PropCo directors, familiarity
threat). [A]
• Recognises that the suggested warehousing of properties places the
interests of the trust ahead of PropCo. This may not be ethical. [P]
• Discusses whether the trust complies with the Trust Property Control
Act/other laws & regulations
• Candidate does not waffle/dump governance theory [P]
Communication skills
• Responds using an appropriate tone.
• Responds objectively.
Indicators of higher-level application (All SRMG and Ethics)
• Questions the need for austerity to be applied by the trustees, trust
needs to ‘live within its means’. [P]
• Recognises the need to obtain a copy of the trust deed in order to
identify the conditions governing the trust.
• How will the trust fund the acquisition of properties to be onsold to
PropCo? [P]
• Recommends that the trust be registered as a PBO – allows donors to
claim section 18A tax deductions [Tax]
• Tax rate for trusts (40%) is very high. Any profit on sale of properties
will result in either CGT (36%) or income tax (40%). [Tax]
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No attempt
(NA)
Task (d) - Assessment of overall competence
Not
Limited
Borderline
Competent
competent
competence
competent
(C)
(NC)
displayed (LC) (BC)
Highly
competent
(HC)
Task (d) – Commentary
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SPECIMEN RESPONSES FOR TASK B C AND
D
Task (b)
From:
Newly Qualified CA
Sent:
3 December 2025
To:
Leonard van Dyk
CC:
Gideon Madima
Subject: RE: FW: Deferred tax calc
Dear Leonard
Mr Madima asked me to look at your draft deferred tax (DT) calculation for FY2025 and raise
commentary for your consideration. Please find my comments below:
Reference
R58 693’
Comments / questions
carrying
amount of Zambian
property
R49 911’ tax base of
Zambian property
R708 171’ tax base of
local rented property
• We should consider whether the amendment to the Kasuba
shareholders’ agreement causes a loss of control. In such case,
we would not recognise the underlying property in the group AFS,
but rather an investment in joint venture (the tax consequences
would also be different).
• How do we know this is the correct amount of remaining capital
allowances in terms of Zambian tax legislation? Have you
recalculated this with reference to the date when the building was
brought into use, the 10% initial allowance and 5% annual
allowance in terms of the Zambian Income Tax Act?
• Have we considered whether the capital allowances are indeed
allowed? (are there any provisos in Zambian tax legislation we may
not satisfy?).
• The Zambian tax rate differs from SA – cannot use 28% or 27%
throughout.
• Have you considered whether Zambia is indeed the relevant tax
jurisdiction? We should consider whether Zambia follows a sourcebased or residence-based tax system and what the potential
impact of any double taxation agreements (DTAs) with South
Africa might be.
• How was the amount calculated and are we sure it is accurate (e.g.
in terms of timelines, taking new acquisitions into account, taking
into account any improvements to the property, no apportionment
for parts of the year, etc.).
• Have we considered whether capital allowances are indeed
allowed? E.g. Section 13 quin is only effective for properties
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R23 477’
carrying
amount of local own
use property
Rnil tax base of local
own use property
R380’
tax
base
of
office equipment
Rnil
tax
base
of
goodwill
R14 030’ tax base of
trade
&
other
receivables
R4 050’ tax base of
deposits received
R21 382’ tax base of
trade & other payables
R449 811’
taxable
temp difference
28% tax rate
purchased post 1 April 2007 and only for newly acquired properties
(not second-hand).
• It is appropriate to classify the owner-occupied portion as
investment properties as 2% is unlikely to be significant. However,
it would still be classified as PPE if this portion can be sold
separately (unlikely to be the case). Refer IAS 40 par. 10.
[Note: argument may change if 2% represents a whole property as
opposed to floor space within a property]
• Does not appear to be correct. Capital allowances would still be
allowed as it is still commercial property under Section 13 quin
even if used for own offices.
In case no allowances are indeed granted, the resulting temporary
difference would be exempt under IAS 12 par. 15(b).
• Similar to previous comments: how was the amount of remaining
capital allowances calculated and are we sure it is accurate and
appropriate in terms of tax legislation (probably Section 11(e)?)
• Even though there is no tax base (no capital allowances received),
the temporary difference should have been exempted from
deferred tax under IAS 12 par. 15(a), the so-called “initial
recognition exemption”.
• Need to consider impact of Section 11(j) – tax allowance at 25% or
40% depending on timelines and whether the debtor contains a
significant financing component, etc.
• Have you considered the potential impact of section 23H on
prepayments?
• What is the exact nature of the deposits received? If it is seen as
income received in advance and taxed by SARS at the earlier of
receipt or accrual, the tax base should be Rnil and a temporary
difference arises.
• Have we checked that there are no items in here that create
temporary differences? E.g. some accruals such as leave pay
accrual where SARS will give a tax deduction when actually
incurred (section 11(a)) and not when accrued.
• There could be an argument to also provide for DT on the FCTR
arising from the Zambian subsidiary as this in essence represents
a revaluation surplus originating from the revaluation of PropCo’s
net investment in Kasuba. Exchange rate movements were not yet
taken into account in the DT calc for asset & liability items, as Tax
Bases are also given at the closing rate (they agree to accounting
Carrying Amounts). Need to consider IAS 12 par. 38 – 45. This is a
complex matter and I recommend using an expert.
• The current SA corporate tax rate is 27%, and the use of the 28%
tax rate is incorrect.
• Probably cannot use 28% rate for Investment Properties. There is
a rebuttable presumption in IAS 12 par. 51C that the carrying
amount will be recovered through sale (unlikely to be rebutted as
properties are increasing in value and can be sold at a gain). The
portion of the temporary difference above base cost is provided for
at the CGT rate. The portion below base cost is provided for at
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27% as a future recoupment of capital allowances upon sale
(Section 8(4)(e)).
I hope my comments offer sufficient guidance to allow you to finalise the calculation. Please let
me know if anything is unclear or if you have any questions.
Regards
Newly Qualified CA
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Task (c)
From:
Newly Qualified CA
Sent:
3 December 2025
To:
Gideon Madima
CC:
Subject: Newco 667 property investment
Dear Gideon
Many thanks for asking for my commentary and inputs regarding your Excel spreadsheet
workings. I suspect that the Newco 667 accountant has been too optimistic in his/her forecasts:
▪
▪
▪
Vacancies are forecast to decline from the current 7% level to 4% from FY2028 onwards.
That does not seem realistic given Newco 667’s history and the state of the economy at
present.
The forecast increases in average monthly rentals of 6% in FY2026 and 7% thereafter
seems too high given the historic averages (in FY2025, the average increase was 3.5%).
The forecast increases in property expenses of 5.5% in FY2026 and 5.0% thereafter is
lower than the rental income forecasts and recent history. It may be more likely that
expenses could increase at higher than rental income escalations due to local authorities
increasing municipal charges due to their budget deficits.
Some other comments for your consideration:
▪
▪
▪
▪
▪
The acquisition price of R100 million implies a cap. rate of 7.8% based on FY2025’s net
rental income (FY2026: 8.5%). This is lower than PropCo’s 9.0% cap rate used in the past
to value properties. It would appear that the Newco 667 property is overvalued. Applying
a 9% cap rate to FY2025’s net rental income would result in a fair value of R87.1 million
and not R100 million. It would need to be determined if the 9.0% cap rate used in the past
is in line with cap rates used for neighbourhood shopping centres. The valuation of the
Newco 667 property could be very sensitive given that Yvonne and her brother-in-law are
the shareholders in the company.
The forecast cash flows do not include taxation. Perhaps taxation should be included as
this is real expense to be incurred.
It may also be worthwhile to include any potential CGT on disposal of the property at the
end of year 5.
Some would argue that the financing aspect of the acquisition and disposal of the property
should be ignored for the purposes of evaluating the potential IRR on investment.
However, I believe that financing in the property industry is a key element in evaluating
potential returns and hence, I agree that you have included the cash flows associated with
the bank loan in your workings.
I noticed that you used a cap rate of 9.0% to value the property in FY2030. This is
consistent with PropCo’s historic cap rate.
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▪
▪
▪
What is PropCo’s hurdle rate for property returns? The potential IRR needs to be
compared to this rate to evaluate whether it meets PropCo’s minimum return on
investment.
It may be a good idea to run sensitivity and scenario analyses on PropCo’s potential IRR.
These types of analyses provide useful guidance about potential returns assuming low
road, base case and high road scenarios.
The interest rate on the loan on 10% is reasonably favourable in the current borrowing
and interest rate environment.
I trust my comments are useful for your analysis. Please let me know if there is anything else you
require.
Regards
Newly Qualified CA
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Task (d)
From:
Sent:
To:
CC:
Subject:
Newly Qualified CA
3 December 2025
Freeman Njeke
Re: Funding & governance of the HfC Trust
Dear Freeman,
I was delighted to receive Gideon’s email dated requesting that I agree to an appointment as a
trustee on the board of trustees of the Hope for the Children’s Trust (HfC Trust). As a newly
qualified CA, I view my role within the social contract which exists between my profession and
society as vital, and as such giving of my time is an important way for me to contribute to society.
In this spirit, I expect no compensation in any form for the time that I will invest as a trustee of HfC
Trust.
As a CA, I am bound by the requirements of SAICA’s Code of Professional Conduct. This requires
me to act with integrity, act objectively and apply professional sceptism. I therefore feel that it is
the right that I carefully consider your invitation. I would like to arrange an opportunity to engage
with the board of trustees to obtain additional information relating to certain issues, which would
then put me in a position to accept or reject the invitation. I would, however, like to confirm that
my appointment would be the outcome of due process having been followed – e.g. that it has
been approved by the governing body as a whole.
I would like to stress the importance of my being free of undue influence in my prospective role
as a trustee. Should I accept the appointment, I feel it important to note that my decision-making
will not be swayed or influenced by promises of being unduly benefited in the workplace at
PropCo. Please understand that I cannot compromise on my professional values.
In response to your specific request, I have prepared Attachment A: Concerns, which details my
concerns around the current funding model and governance of the trust. Please do not be
offended by any comments that I have raised. I feel that it is important to raise the issues at the
upcoming meeting next week so that the trustees can reflect on them.
Regards
Newly Qualified CA
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ATTACHMENT A: CONCERNS
Funding model
Having considered the current funding model of the trust and the prevailing economic climate and
its impact on the retail property market, I am of the opinion that the funding model is unsustainable.
The use of interest-bearing borrowings to obtain the funds used in the allocation of bursaries, with
the trust’s investment in PropCo serving as security, exposes the trust to significant risk. The trust
is dependent on PropCo’s dividend declarations in order to service its interest-bearing borrowings.
Gideon indicated that PropCo has not been paying meaningful dividends and given the current
economic climate and PropCo’s already higher than average vacancies as a % of gross lettable
area (GLA), the likelihood of meaningful dividend payments in future is remote. As the borrowings
are secured by the trust’s 10% interest in PropCo, the trust’s bankers will invoke their rights to
these shares leaving the trust with no income generating ability.
Given that the trust and its work is viewed as a vehicle through which PropCo would like to
improve its legitimacy and be seen to be a good corporate citizen, should PropCo not be funding
the trust as part of its corporate social investment (CSI) initiatives? I believe that the board of
trustees should engage with the board of directors of PropCo in an effort to highlight the funding
challenges and request an allocation of funds from PropCo’s CSI budget.
I need to be frank – PropCo uses the HfC Trust in its marketing media to portray itself as a good
corporate citizen. This in itself in my mind is a risk to PropCo’s reputation. The fact that the trust
had to finance the acquisition of its interest in the PropCo shares itself and needs to borrow funds
in order to be able to finance its bursary allocations, could taint PropCo’s reputation in the retail
property market and the patrons of the outlets renting retail space from PropCo. It would be a
good idea to bring this to the attention of the PropCo board if the trustees of the HfC Trust were
to engage with them as suggested above.
A further concern regarding the funding model relates to the fact that the trust is paying a premium
of close on 5% above prime to the Njeke Family Trust on the loan from the latter to fund the
acquisition of the HfC Trust’s interest in PropCo. This rate may not be market related and
exacerbates the poor financial position of the HfC Trust.
Allocation of bursaries
In my opinion, the trust’s ability to pay bursaries to deserving learners should be a function of the
trust’s ability to access funds without having to borrow money. I was interested to see that 100
bursaries were allocated amounting to R7,5 million during 2025. Although this is admirable, I find
it concerning that so many bursaries are being allocated. The board of trustees needs to consider
adopting a more austere approach and be more pragmatic given the current financial position of
the trust.
Although the suggestion to target third parties for donor funding is crucial to the trust’s continued
existence, these third parties might discover the lack of financial support from PropCo. It is likely
that potential donors will not be clamouring to contribute to the trust if they become aware of the
fact that PropCo is benefiting from its association with the trust but not contributing to it financially.
It is important that all bursary allocations follow due process. I have some questions regarding
the bursary process:
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•
•
•
•
How are bursary applications reviewed and processed? Is the decision making process
in awarding bursaries robust and fair? What are the eligibility criteria applied when
awarding a bursary? Should no formal criteria exist then I would gladly assist the board
of trustees in developing such criteria.
Does the trust keep track of bursary students’ performance? Is it condition of a bursary
awarded that the bursar performs satisfactorily academically? If this is the case then the
board of trustees should have monitoring mechanisms in place to the performance of the
bursars? Do such mechanisms exist and does poor academic performance on the part
of bursars disqualify from being considered for future bursary allocations? Again it is
likely that donors would expect these measures to be in place.
Are bursaries awarded each year or are they automatically renewed depending on
scholarly performance? It may be very unfair to award a bursary to a student in say
grade 8 and then not renew it the next year. As such the trust has a social commitment
funding the bursar going forward until the particular phase at school has been completed
or their tertiary studies are completed.
Should the bursar’s circumstances change and/or the bursar’s academic performance
be such that they should no longer qualify for a bursary then would the
allocation/eligibility criteria prevent a further bursary from being awarded to the bursar?
Disbursement of funds in respect of bursary allocations
I again have a few questions, this time around the robustness of the disbursement of funds:
•
•
Funds should only be disbursed once the bursary allocation process has been signed
off on, with the board of trustees being satisfied that the applicant is eligible for a
bursary?
How are the funds disbursed? Does the trust pay the provider of the education services
directly as and when payments are due? The same would apply to accommodation
fees. How is “pocket money” disbursed? Ideally the trust should disburse these
amounts gradually over time. These controls will limit the likelihood of a
misappropriation of funds by the bursars.
Governance concerns
HfC Trust operations and governance would be subject to the provisions of the trust deed. The
trust deed will set out how the trust should be administered, the duties of the trustees, the due
process to be followed when appointing or removing trustees, amongst others. We would need
to check that the material conditions of the trust deed are being complied with and whether any
amendments to the trust deed are required.
Having reflected on a number of issues that have come to my attention in connection with the
trust, I would like to raise a few concerns, which I have regarding the governance of the trust.
I am mindful of the fact that the trust is not legally required to comply with King IV TM however the
governance principles in said report can be regarded as best practice and as such the concerns
I am raising are areas in which the trustees could consider bringing about improvements. The
latter is necessary particularly in light of the board of trustees’ intention to approach third parties
for funding.
Lack of formal risk management
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Various instances, the current funding model being one, are red flags from a risk management
perspective. A key concern for me is an apparent absence of formal risk management policies
and procedures (e.g. despite the CEO recognizing that the paper trail for the allocation of
bursaries is not particularly strong, nothing is done about this). It should be the board of trustees’
responsibility to ensure that procedures are in place to identify, assess and respond appropriately
to risks. I would gladly assist in formalising the risk management of the trust going forward.
Board of trustees as governing body of the trust
In order for the board to exercise its governance role objectively, the board of trustees should
ensure that a balance of power exists. Third parties might question whether a balance of power
indeed exists given the present composition of the board. The fact that the chairperson of the
board (Freeman) and chief executive officer (Rolihlahla) are related could raise questions around
the independence of the board.
The above familiarity threat extends further. The terms of the HfC Trust’s loan from the Njeke
Family Trust not being market-related supports my opinion regarding the independence of the
board. As mentioned earlier, the interest rate charged on the loan is excessive and constrains the
HfC Trust’s ability to carry out its mandate.
Any external party could also question Hendrick Jooste’s involvement in the trust. He appears to
have a vested interest in the allocation of bursaries as his school sources learners from the pool
of students that bursaries are awarded to.
In all of the cases cited above a conflict of interest exists which results in one concluding that the
board of trustees has not to date acted in the best interest of the trust and its mandate.
Lack of transparency
An independent outsider would also question the extent to which transparency prevails in the
dealings of the trust.
Given the mandate of the trust, an objective independent outsider may question the transparency
of the process followed in arriving at the decision to compensate Rolihlahla for the administration
of the bursary allocation. Secondly, how was the amount of the compensation determined? Given
the purpose of the trust, one would think that those involved would be doing any work for the trust
on a “pro bono” basis. At least one further bursary could have been allocated had this
compensation not been paid.
The suggestion that PropCo’s Finance & Administration team should perform the recordkeeping
for the trust is not advisable. Third parties donating money to the trust will want the assurance
that the finances are properly accounted for and reported on. To address the conflict of interest
and familiarity threat, which exists, it would be advisable to outsource the recordkeeping and
reporting function to an objective and independent third party. The latter might well be willing to
do the work on a “pro bono” basis for the trust – so the driving force behind the decision to allocate
the accounting of the trust, should not be driven by the cost to be incurred.
Proposed auditors
I was perturbed to read in the minutes that the proposed auditors of the trust have a close
relationship with the Njeke family and the fact that the audit firm do extensive work for the Njeke
family and its business interests. This causes a familiarity and self-interest threat to independence
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(in appearance if not in fact) and may also have a negative impact on the proposed auditor’s
professional competence and due care. It is not my place to question the work being performed
by the existing auditors and the quality thereof – all I wish to do here is to emphasise the
importance of the independence and objectivity of the auditors, which the trust uses in providing
assurance to the users of the financial statements of the trust.
It is also important to emphasise that the audit opinion should be the result of the procedures
performed and evidence obtained by the auditors and not the outcome of undue influence by the
board of trustees. From a stakeholder perspective, the board of trustees should strongly consider
appointing external auditors that are independent of the firm currently performing the assurance
and other services to PropCo.
Proposed warehousing of properties
The proposal in the minutes that properties, which are of interest to PropCo be purchased by the
trust and six months later sold at a significant profit to PropCo, is also concerning. Given the
conflict of interest, which exists between the trust and PropCo, an objective independent outsider
would see such a transaction as creating an ethical dilemma. This proposal is not in the best
interest of neither the stakeholders of the trust nor the stakeholders of PropCo. The trustees need
to remember that the trust would incur costs in respect of the properties, which it will have to
warehouse, with no guarantee that the trust would be compensated for these costs through the
amount at which the properties are then on-sold to PropCo for.
The conflict of interest referred to earlier is to unlikely result in an arms-length value being
identified for said properties. In the process, one of the two parties would be done in.
Depth and breadth of the board of trustees
I would strongly recommend that the size of the board of trustees be reconsidered. Third party
donors will likely have more comfort in a board of trustees not only being larger in number, which
would go far to create a balance of power, but also having a broader skills set.
Conclusion
Improvements in the governance of the trust are imperative should the trust wish to obtain funding
from donors. Given that this might be the only solution currently to addressing the financial
constraints of the trust, urgent attention should be paid by the board of trustees to addressing the
concerns raised.
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