PRESENTATION OF THE ARMSCOR CORPORATE PLAN TO THE PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS MR SIPHO MKWANAZI ACTING CEO

Transcription

1 PRESENTATION OF THE ARMSCOR CORPORATE PLAN TO THE PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS MR SIPHO MKWANAZI ACTING CEO DATE: 24 APRIL 2013

2 SCOPE 1. Introduction 2. Armscor Functions 3. Challenges 4. Strategy Initiatives 5. Strategic Themes Funding and Growth People and Capabilities Organisational Efficiency and Effectiveness Stakeholder Relationships 6. SLA Performance Indicators 7. Financial Performance 8. Questions & Answers 2

3 INTRODUCTION Armscor s mandate is contained in the Armscor Act, which serves as its Memorandum of Incorporation; Within its mandate, Armscor s objectives are to meet the following requirements of the DoD: defence matériel needs technology development research & development analysis test & evaluation effectively, efficiently and economically Adhere to accepted principles of corporate governance and lawfulness 3

4 ARMSCOR FUNCTIONS Acquire Defence matériel on behalf of the Department of Defence as Department may require Manage such technology projects as may be required by the Department Establish a programme management system to support acquisition technology projects Provide for a quality assurance capability Establish a system for tender and contract management for defence materiel Provide defence operational research 4

5 ARMSCOR FUNCTIONS (Cont.) Establish a system for tender and contract management for commercial matériel procurement requested in writing by the Secretary for Defence Dispose of Defence matériel in consultation with the original manufacturer Establish a compliance administration system for the Department as required by the Law Support and maintain such strategic and essential defence industrial capabilities, resources and technologies as may be identified by the Department Establish a defence industrial participation programme management system

6 ARMSCOR FUNCTIONS (Cont.) Provide marketing support to defence-related industries in relation to defence matériel Manage facilities identified as strategic by the Department in a service level agreement Maintain such special capabilities and facilities as are regarded by the Corporation not to be commercially viable but which may be required by the Department for security and strategic reasons 6

7 ARMSCOR FUNCTIONS (Cont.) Subject to Ministerial approval, Armscor may: Exploit commercial opportunities arising from its duty to acquire defence matériel and technology projects; Procure commercial matériel on behalf of any Organ of State and; Subject to arms control rules, acquire defence matériel and manage technology projects on behalf of any sovereign State 7

8 National Private Production Capacity National Research Capacity Diversification / Commercialisation of Defence IP / Technologies CHALLENGES Strategy Pillars Armscor Challenges Legal Mandate 8

9 STRATEGY INITIATIVES Strengthening Armscor Insufficient Funding: Financing model Industry Support Sustainability: Retention of capability & capacity Create market expansion opportunities i.e. SADC, AU & BRICS International strategic partnerships Support Government strategic initiatives i.e. job creation, skills development Outdated IT & Infrastructure: Renewal of application systems Systems alignment & integration Human Resources: Skills development Skills retention Improve HR capacity Poor Perception: Improve marketing efforts to reposition Armscor brand 9

10 STRATEGIC THEMES 10

11 STRATEGIC THEMES Based on the Corporation Strategy, themes underpin the successful execution Funding & Growth People & Capabilities Organisational Effectiveness & Efficiencies Stakeholder Relationships 11

12 Measurement of success: 2012/ / / /16 1. FINANCING OF ARMSCOR 1.1 Review the finance model developed for the Armscor Group to ensure it results in a sustainable organisation Review funding model and implement 1.2 Review of AB Logistics Review all business options and Implement FUNDING & GROWTH Service charge Model developed 1/4/2012 Implementation in progress Restructuring completed 1/4/2012 Reviewing financing 31/8/ /8/ Finalise three-year Service Level Agreement (SLA) with the Secretary for Defence that includes: Functions of the Corporation Measurable objectives (performance agreement) Terms and conditions applicable to service to be rendered; and Implementation of service charge (10%) on all acquisition activities service charge included in SLA Reviewed SLA & engaging DOD 31/07/2012 Finalisation with DOD in progress 31/5/ /5/ /5/2016

13 FUNDING & GROWTH (cont.) Measurement of success: 2012/ / / /16 2. COMMERCIAL OPPORTUNITIES 2.1 Increase Acquisition activities and partnering with industries in SADC, AU and BRICS Pursue identified opportunities in Botswana, Malawi, Angola Increase the number of countries in SADC & AU from the four above where opportunities can be pursued. Identify opportunities in BRICS and IBSA Identification of opportunities to exploit military technologies and IP to develop products through the use by the SA Defence Force or civil products produced directly from the IP held by the Corporation Countries identified 30/6/2012 Identification of opportunities to exploit Military technology & IP in process 30/11/ /3/2014

14 FUNDING & GROWTH (cont.) Measurement of success: 2012/ / / / Increase Acquisition activities and partnering with industries in SADC, AU and BRICS (cont.) Develop a research & development business plan, focussing on cost of innovation Marketing of Armscor s functions and services 30/6/ /11/ 2013 Identify one commercial opportunity to pursue Identify one commercial opportunity to pursue 3. MARKET INTELLIGENCE 3.1 Establishment of the market intelligence database New 30/3/2014

15 PEOPLE & CAPABILITY Measurement of success: 2012/ / / /16 1. TRANSFORMATION 1.1 Achievement of approved Equity Plan that is directed towards Achieved 95.66% target of 875 black employees Increasing race representation Achieved 94.77% target of 440 female employees (904) 64% (916) 65% (927) 66% Improving gender composition (457) 32.50% (463) 33% (470) 34% 2. STAFF TURNOVER 2.1 Controllable staff turnover in technical positions 3. ORGANISATIONAL CULTURE 3.1 Employee satisfaction measurement (previous year used as baseline) 2.39% less than target of 4,5% Measurements completed Further actions identified implemented to improve results 30/6/2012 <4,5% <4,5% <4,5% 3.5% improvement 3.5% improvement 3.5% improvement Conduct cultural survey in process & awaiting results

16 PEOPLE & CAPABILITY (cont.) Measurement of success: 2012/ / / /16 4. SKILLS 4.1 Skills development Bursaries for full-time studies (numbers) Appointment and development of Talent Development Employees (number of employees through programme) HR Plan Reviewed 31/8/2012 Succession planning implemented & salary adjustments in line with benchmark Execution of Personal Development Plans for identified employees in key positions (% of development activities completed) 5. SKILLS 5.1 Skills development contribution to BBBEE Scorecard: SD Score as % of maximum (20 points) 6. ORGANISATIONAL STRUCTURE 6.1 Implementation of organisational structure and recruitment of required capability 85% 85% 85% New 70% 73% 76% Organisational structure implemented and appointment of General Managers identified completed 31/8/2012

17 ORGANISATIONAL EFFECTIVENESS & EFFICIENCIES Measurement of success: 2012/ / / /16 1. ORGANISATIONAL EFFECTIVENESS 1.1 Conduct Dockyard due diligence study and develop improvement plan Due diligence study in process 31/7/ INFRASTRUCTURE RENEWAL 2.1 Implementation of approved ICT Strategy Approved ICT Strategy Renew Storage Area Network (SAN) Replace end of life processing area network (PAN) ICT Strategy finalised 31/7/ /6/ /6/ /6/2013 ERP: o o o Finalise implementation partner Implement all core modules Implement all self-service and business intelligence modules 31/3/ /7/ /7/20 15

18 ORGANISATIONAL EFFECTIVENESS & EFFICIENCIES (cont.) Measurement of success: 2012/ / / / Implementation of approved ICT Strategy (cont.) Develop a Disaster Recovery Plan for the organisation. Implementation of the Disaster Recovery Plan Implementation of integrated discovery plan in process 31/3/ /9/2014 Develop a Business Continuity Plan New 30/11/2014 Implementation of a Business Continuity Plan. New 31/8/2015 Support and Maintenance of the ERP system. New 31/3/2016

19 STAKEHOLDER RELATIONSHIPS Measurement of success: 2012/ / / /16 1. STAKEHOLDER ENGAGEMENT STRATEGY Strategy review in process 1.1 Improved Stakeholder Satisfaction Survey New 5% improvement 7% improvement 10% improvement 2. LOCAL INDUSTRY SUPPORT 2.1 Increase % of local industry spent in respect of Special Defence Account and General Defence Account managed by Armscor (increase based on previous year s spending) Industry spent 8.47% > 5% 5% 5% 5% 2.2 Finalise policies to transform, to maintain, and sustain local Defence industry: BBBEE policy transformation and preference for local industry Develop an integrated industry support strategy Finalisation of Integrated industry support strategy & BBBEE policy in process 30/6/ /8/ 2013 Determine improvement required Determine improvement required

20 STAKEHOLDER RELATIONSHIPS (cont.) Measurement of success: 2012/ / / /16 3. BRAND POSITIONING & MARKETING 3.1 Reinforce Armscor s brand position in the industry Brand recognition External client satisfaction survey Establishment of baseline in process New 98% 98% 98%

21 SLA PERFORMANCE INDICATORS 21

22 CAT 1 CAPITAL DEFENCE MATÉRIEL ACQUISITION EXLUDING STRATEGIC DEFENCE ACQUISITION BUT INCLUDING TECHNOLOGY ACQUISITION Key performance indicator Goal 2012/ / / / Contracts to be placed by Armscor Armscor s target of 90% of commitment of funds to be measured against the formally planned value of commitments, which is based on requirements received and confirmed as valid requirements from the DOD. 1.2 Cash flow (contractual payments made) Armscor s target of 90% cash flow would be measured against the formally planned cash flow in terms of achieved commitments for the financial year % achieved vs. 90% target 94% achieved vs. 90% target 90% 90% 90% 90% 90% 90% Actual cash flow will be measured against planned cash flow in terms of first revision and adjusted for factors beyond Armscor s control.

23 STRATEGIC DEFENCE ACQUISITION Key performance indicator Goal 2012/ / / / Contracts to be placed by Armscor Armscor s target of 90% of commitment of funds to be measured against the formally planned value of commitments, which is based on requirements received and confirmed as valid requirements from the DOD % achieved vs. 90% target 90% 90% 90% 2.2 Cash flow (contractual payments made) Armscor s target of 90% cash flow would be measured against the formally planned cash flow in terms of achieved commitments for the financial year % achieved vs. 90% target 90% 90% 90% Actual cash flow will be measured against planned cash flow in terms of first revision and adjusted for factors beyond Armscor s control

24 SYSTEM SUPPORT ACQUISITION AND PROCUREMENT Key performance indicator 3.1 Contracts to be placed by Armscor Armscor s target of 90% of commitment of funds to be measured against the formally planned value of commitments, which is based on requirements received and confirmed as valid requirements from the DOD Goal 2012/ / / / % achieved vs. 90% target 90% 90% 90% 3.2 Cash flow (contractual payments made) Armscor s target of 90% cash flow would be measured against the formally planned cash flow in terms of achieved commitments for the financial year. 115% achieved vs. 90% target 90% 90% 90% Actual cash flow will be measured against planned cash flow in terms of first revision and adjusted for factors beyond Armscor s control

25 SCHEDULE PLACEMENT Key performance indicator 4.1 Average time taken from receipt of requirement to placement of contract is 90 days Goal 2012/ / / /2016 New 90 days 90 days 90days

26 MANAGEMENT OF DEFENCE INDUSTRIAL PARTICIPATION (DIP) Key performance indicator 5.1 Value of DIP credits to be granted to overseas suppliers Goal 2012/ / / /16 R441m R358m R18m R499m achieved against target of R350m

27 MANAGEMENT AND EXECUTION OF DEFENCE TECHNOLOGY, RESEARCH, TEST AND EVALUATION REQUIREMENTS OF THE DEPARTMENT OF DEFENCE Key performance indicator 6.1 Research and Development to achieve contractual milestones / deliveries as per agreed Memorandum of Agreement and orders received for the financial year Goal 2012/ / / /16 90% 90% 90% 100% achieved vs. 90% target

28 Key performance indicator MANAGEMENT AND PERFORMANCE AGAINST DOCKYARD MANDATE 7.1 Armscor Dockyard to achieve 90% compliance with the Performance Agreement indicators and deliverables Goal 2012/ / / /16 Achieved 92% vs. 90% target: Tshukudu 115% SAS Protea 78.2% SAS Drakensberg 90% Charlote Maxeke 75% SAS Indlovu 100% 90% 90% 90% 7.2 Dockyard to ensure necessary technical training support for SA Navy employees as and when required 100% achieved vs. 90% 90% 90% 90% 90% compliance with SA Navy requirements 7.3 Ensure 90% compliance with projects cash flow management 96.1% achieved vs. 90% target 90% 90% 90% 7.4 Submission of Quarterly Reports as per reporting timeline schedule 90% compliance with schedule 100% achieved vs. 90% target 90% 90% 90%

29 FINANCIAL PERFORMANCE 29

30 BALANCE SHEET AMOUNT (Rm) DETAIL Provisional Actual 2013/03/ /03/31 ASSETS NON-CURRENT ASSETS PROPERT Y, PLANT AND EQUIPMENT INT ANGIBLE ASSET S OTHER NON CURRENT ASSETS Post retirement medical benefit asset CURRENT ASSETS Inventories T rade and other receivables Cash and short term deposits TOTAL ASSETS EQUITY AND LIABILITIES CAPITAL AND RESERVES ORDINARY SHARE CAPIT AL NON-DIST RIBUT ABLE RESERVE ORDINARY SHAREHOLDERS' INT EREST NON CURRENT LIABILITIES CURRENT LIABILITIES T rade and other payables and provisions Deferred income TOTAL EQUITY AND LIABILITIES

31 INCOME STATEMENT DETAIL 2012/13 Budget 2012/13 Estimate INCOME Sales Less: Cost of Sales (643.7) (797.5) GROSS CONTRIBUTION Service Charge Other income Net Interest OPERATING EXPENDITURE ( ) (931.3) Direct personnel cost (770.1) (707.2) Other Operating Expenses (320.3) (224.1) NON CASH-FLOW ITEMS (47.1) (23.9) Depreciation (47.1) (29.6) Bad debts (written off) / Recovered NET SURPLUS

32 Questions & Answers 32