GOVERNMENT PRINTING WORKS Building a New Government Printing Works GOVERNMENT PRINTING WORKS STRATEGIC PLAN PRESENTATION TO PORTFOLIO COMMITTEE 9 June 2009

AGENDA Background Key Priorities Going Forward Progress with Conversion Process Progress with Key Projects New Facilities Funding Requirements Summary and Closing Remarks

The objective of our presentation is as follows... Firstly, we would like to thank the Portfolio Committee for the opportunity and hope that we can give the Committee an insight into the progress and developments at GPW for the 2009/10 financial year and beyond Provide insight into the key priorities going forward Provide an update on the conversion processes to date Provide the Portfolio Committee with a high level overview of the funding requirements going forward Provide an overview of some of the achievements to date The success of GPW is key to the turnaround of DHA and the sanctity of the State, as GPW is the mandated security printer

The background and discussions to date indicate whilst a lot has to be done, the sustainability of GPW still remains a challenge (1/2) GPW was established in 1888 as the Government Printer but asset stripping has occurred over many years due to Governments lack of investment in the printing infrastructure In 1976 GPW was established as a Trading Entity under DHA but has been unable to secure adequate revenues to capitalise and invest in modern facilities and equipment required of a state-of-the-art security printer A business case was prepared and presented to NT and DPSA in May 2007 for conversion but NT and DPSA raised several issues and the business case was never finalised GPW is key to the delivery of security printing to DHA (and other National Departments) and therefore the efficient, secure functioning of GPW is critical to RSA’s external image, performance and commitment to its Stakeholders Whilst the conversion process received attention, the organisation was bleeding operationally and at the heart has been the loss of skills due to uncompetitive salaries, poor working conditions and restructuring fatigue GPW facilities are not conducive to a “manufacturing” type environment and hence inefficient and costly production processes There was no capital available initially for proper and modern facilities and equipment

The background and discussions to date indicate whilst a lot has to be done, the sustainability of GPW still remains a challenge (2/2) The AG raised various qualifications issues and these have not been fully addressed DHA charged public for printing of documents but funds flow to national fiscus and not GPW “Profits” could not be retained for future investment in the assets and infrastructure of GPW – therefore resulted in asset stripping Opportunities presented itself for printing services outside RSA but could not be maximised and capitalised on due to capacity and other constraints Although some funds has been provided in the MTEF, GPW still requires additional government funding but this is inadequate to meet its capitalisation requirements and there is uncertainty on future allocations GPW therefore ventured into other printing areas to remain viable but these are non-core to its mandate There is no proper governance structure in place to guide and advise GPW and it’s Shareholders on the print environment, operations and best practices DHA fully understands these issues and committed to implement a turnaround strategy that meets all stakeholder aspirations, while ensuring a logical and phased process and sustainable GPW

Going forward, the GPW has set certain key priorities, including the conversion of the GPW into a GC (1/4) Financial Management Accurate planning and forecasting Maintain optimal cash flows and working capital Manage financial risks Develop new financial system for print environment Reduce AG findings and qualifications Cost Management Change/review the cost/product pricing system/strategy Reduction in wastage and spoilage Operations Management Replacement of dated technology and machinery Optimisation of production capacity and efficiencies Achieve product/service excellence

Going forward, GPW has set certain key priorities, including the conversion of GPW into a GC (2/4) ICT Management Master System Plan and ICT strategy Develop Disaster Recovery Plan Ensure compliance testing for all new initiatives Review and update policies Upgrade and integration of ICT systems for printing environment Supply Chain Management Reduce Stock Levels Phase out slow moving items and redundant stocks Strategic supplier management Update and develop electronic suppliers database and order information Contract and SLA management

Going forward, GPW has set certain key priorities, including the conversion of GPW into a GC (3/4) HR, Strategy and Transformation Develop and Implement Human Capital Strategy Policy Development and Strategy alignment Align HRM Practices and Strategies IPC in place Trained, skilled and service oriented staff in place Security Security risk assessment New and updated physical, personnel, production and documentation security systems in place Introduce vetting system for key personnel

Going forward, GPW has set certain key priorities, including the conversion of GPW into a GC (4/4) Internal Audit Development of internal audit and risk management plans Monitor compliance with PFMA and related regulations Marketing Develop GPW Brand Local Customer Retention Local Business Development Develop an aggressive regional marketing strategy on face value documents However, key to the above is the turnaround and conversion of GPW in the MTEF period

We have also made substantial progress with the conversion process despite delays and challenges, and a phased process is planned A business case has been prepared in consultation with NT and DPSA and it was evaluated by a panel in September 2008, addressing the issues raised by NT and DPSA originally We have consulted with the Minister, Deputy Minister, NIA, SAPS, GCIS and Labour and received full support for the process and model A S36 (3) application has been approved by NT and has been implemented An application was been made to the Minister (DHA) for delegations to the CEO and was granted The Ministers of Finance and DPSA have concurred with the conversion to a Government Component and we are awaiting the signing of Notices and Presidential Minute by the President The relevant Government and Establishment Notices has been prepared and will be gazetted once the President signs the Notices and Presidential Minute. The financial delegations as required by the PFMA have been prepared DHA has committed certain resources via the Turnaround Project to assist with the burning issues at GPW and an Acting CFO has been appointed to assist with the financial affairs at GPW We therefore need to ensure that the notices are gazetted as soon as possible and that the key activities are implemented with speed

In addition GPW has also embarked on certain key projects, the new passport processes being one of them and the status is as follows The equipment has been delivered and commissioned. Employees have been trained on the passport machine The equipment was installed at the new facilities at the “Old Mint”, which was refurbished and the site was finally handed over during April 2009 The new South African passport was launched on the 8th April 2009 and production commenced the following week A total capital investment of R307m has been paid to date towards the new passport facility The above equipment will be the first in a series of upgrades to modernise and ensure a secure print environment

We have also identified the future “home” of GPW and negotiations are in progress to expedite this matter We had originally envisaged building a brand new facility at R700m (2005 prices) but the new facilities can be done at a substantially lower price The new site will be the “Old Mint” and we are finalising the plans and handover of this site to GPW The costs thus far were funded by DPW, but GPW will be funding some of the future expenses GPW will enter into a concession of 20-30 years dependent on building costs funded by DPW and the monthly rentals The building development should commence in 2009/10 financial year and be ready for completion on 2010/11 The additional lease costs to GPW will be R3-4m per month The new facilities will be key to improvement in the production environment and production processes and should also boost employee morale and productivity

This excludes the cost of the new facility Finally, the transformation and modernisation will require additional capital injection by the State to ensure conversion and success of GPW DETAILS 2009/10 R 000’s 2010/11 Asset Replacement - Machinery 190 521 69 216 New IT System 75 000 Transformation/Conversion Costs 56 800 93 661 This excludes the cost of the new facility

The Income estimates can be summarised as follows: Statement of Financial Performance (R million) Audited Outcome 2005/06 Audited Outcome 2006/07 Audited Outcome 2007/08 Unaudited Estimate 2008/09 Medium-Term Estimate 2009/10 Medium-Term Estimate 2010/11 Medium-Term Estimate 2011/12 Revenue 466.2 482.4 470.0 571.7 605.5 658.5 717.1 Transfers Received 0.2 110.2 137.4 331.2 93.0 123.3

The Expenditure estimates can be summarised as follows: Statement of Financial Performance (R million) Audited Outcome 2005/06 Audited Outcome 2006/07 Audited Outcome 2007/08 Unaudited Estimate 2008/09 Medium-Term Estimate 2009/10 Medium-Term Estimate 2010/11 Medium-Term Estimate 2011/12 Employee Benefits 61.2 78.9 80.2 82.9 165.5 172.3 180.9 Administrative Expenditure 23.9 16.2 27.6 27.4 34.9 35.7 37.5 Production & Stores 13.3 20.6 36.4 55.8 25.6 55.2 94.0 Equipment 0.8 0.9 1.1 1.5 1.7 1.8 1.9 Professional Services 17.1 14.9 18.4 28.4 21.1 15.5 16.3 Sundry Expenditure 4.5 1.0 49.0 1.3 1.4

There are challenges ahead but hope that this presentation highlights the support/resources required from Government at this critical juncture We urge you to please provide us with the necessary advise and support during the transformation process Critically evaluate our plans going forward Support us by ensuring that the requisite funds are forthcoming, as this is always key to any turnaround initiative WE THANK YOU KINDLY!