ARMSCOR ANNUAL REPORT 2011/12 PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS MR SIPHO MKWANAZI – ACTING CEO.

ARMSCOR ANNUAL REPORT 2011/12 PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS MR SIPHO MKWANAZI – ACTING CEO DATE: 24 October 2012 1

SCOPE Aim 2. Introduction 2.1 Corporate Profile
2.2 Objectives & Functions 2.3 Reporting Structure 2.4 Overall Organisational Performance for the 2011 / 2012 Financial Year 3. Review of Operations 3.1 Acquisition 3.2 Research and Development 3.3 Dockyard 3.4 Armscor Finances 4. Corporate Performance 4.1 Corporate Performance against Goals 4.2 Challenges 5. Questions and Discussions 2

To present an overview of the ARMSCOR 2011/ 2012 Annual Report
1. AIM To present an overview of the ARMSCOR 2011/ 2012 Annual Report 3

2. INTRODUCTION 4

2.1 Corporate Profile Armaments Corporation of South Africa (SOC) Limited (Armscor) established in terms of the Armaments Corporation of South Africa, Limited Act (Act 51 of 2003) State – owned entity as contemplated in the Companies Act, 2008 Listed as a Schedule 2 Public Entity in terms of the PFMA Further regulated by the Regulations issued in the terms of the PFMA and the Companies Act The Minister of Defence and Military Veterans is representing the Shareholder for Armscor 5

2.2 Objectives and Functions of the Corporation
Objectives of the Corporation: To meet the defence materiel requirements of the Department effectively, efficiently and economically To meet the defence technology, research, development, analysis, test and evaluation requirements of the Department effectively, efficiently and economically Functions of the Corporation: The Corporation must: a. Acquire such defence materiel on behalf of the Department may require b. Manage such technology projects as may be required by the Department c. Establish a programme management system in support of the acquisition and technology projects contemplated in (a) and (b) 6

2.2 Functions of the Corporation … continued
d. Provide for a quality assurance capability in support of: the acquisition and technology projects in (a) and (b) any other service contemplated and required by the Department e. Establish a system for tender and contract management in respect of defence materiel and, if, required in a service level agreement or if requested in writing by the Secretary for Defence, the procurement of such commercial material f. Dispose of defence materiel in consultation with the person who originally manufactured the materiel g. Establish a compliance administration system for the Department as required by applicable international law, the National Conventions Arms Control Act, 2002 and the non – proliferation of Weapons of Mass Destruction Act, 1993 7

2.2 Functions of the Corporation … continued
h. Support and maintain such strategic and essential defence industrial capabilities, resources and technologies as may be identified by the Department Provide defence operational research Establish a defence industrial participation programme management system Provide marketing support to defence industries in respect of defence materiel, in consultation with the Department and the defence industries in question Manage facilities identified as strategic by the Department in a service level agreement, and 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 or strategic reasons 8

2.2 Objectives and Functions of the Corporation … continued
2. (a) The Corporation may, with the approval of the Minister – Exploit such commercial opportunities as may arise out of the Corporation’s duty to acquire defence materiel or to manage technology projects procure commercial material on behalf of any organ of state at the request of the organ of state in question Subject to National Conventional Arms Control Act. 2002, the Regulations of Foreign Military Assistance Act, 1998, and the Non – Proliferation of Weapons of Mass Destruction Act, 1993, perform any function which the Corporation may perform for or on behalf of the Department in terms of this Act or on behalf of any sovereign State b. The Minister may impose such conditions in respect of the performance of a function contemplated in paragraph (a) (iii) as may be necessary in the national interest 9

2.3 Reporting Structure Minister of Defence and Military Veterans ARMSCOR’S REPORTING STRUCTURE TO THE MINISTRY OF DEFENCE AND MILITARY VETERANS Chairman of Armscor Armscor Board of Directors Armaments Corporation of South Africa (ARMSCOR) 10

THE BOARD Lt. General (ret) M M Motau Mrs R Mokoena Mr EL Borole
Chairperson of the Board Mrs R Mokoena Deputy Chairperson of the Board Mr EL Borole Chairman: Audit and Risk Committee of the Board Dr P P Dyantyi Dr J L Job Chairman: Finance, Business Development & Investment Committee of the Board Dr. R R Mgijima Chairman: Acquisition Committee of the Board Mr LV Mosiako Chairperson: Research and Development Committee of the Board Mr SA Msibi Chairman: Human Resources and Ethics Committee of the Board Adv V September Chairperson: Marketing and Industry Support Committee of the Board Mr S Mkwanazi Acting Chief Executive Officer: Armscor Mr JG Grobler Chief Financial Officer: Armscor 11

MANAGEMENT BOARD CHIEF EXECUTIVE OFFICER (ACTING) JS Mkwanazi
ACQUISITION D Griesel (Act General Manager) DOCKYARD TT Goduka (General Manager) ARMSCOR DEFENCE INSTITUTES (PTY) LTD KP Hanafey (Acting General Manager) HUMAN RESOURCES SP Mbada (General Manager) LOGISTICS AND MATÉRIEL SUPPORT Ms. NRM Borotho (General Manager) QUALITY AND IT R Ramgolam (Acting General Manager) COMPANY SECRETARY Adv. NB Senne FINANCE AND INFRASTRUCTURE JG Grobler (General Manager) 12

2.4 Overall Organisational Performance for the 2011/12 Financial Year
Corporate Governance: Achieved clean audit – no qualifications. Performance against Corporate Goals: - Most of the Corporate Goals were achieved or exceeded, however, there are areas that still need continuous improvement Finance: - The Group realised a profit of R73,3 million which is an improvement from the previous financial year as well as from the initial budgeted position Acquisition Programmes Highlights: The Strategic Defence Package (SDP’s) is winding down and the focus is on support and maintenance Major capital programmes performed reasonably well even those that were delayed have improved 13

Overall Organisational Performance
Human Resources (HR) Human Capital - The organisation has achieved most of its set goals in this area, however it is still faced with the challenges of gender balance and retention of skills and talent Transformation - The organisation continues to transform itself in accordance with the employment equity requirements to reflect the demographics of the country Armscor managed to retain critical skills by achieving a staff turn over of 2,4% in technical positions, excluding retirements Employee satisfaction – The Employee satisfaction survey indicated a slight improvement compared to the previous financial year. 14

Overall Organisational Performance
Compliance Two ISO 9001: 2008 Surveillance audits were conducted by SABS and certification was confirmed Social Investment Armscor is involved in a School Learner Enhancement Programme for nine schools in Pretoria ( eight in Atteridgeville and one in Olievenhoutbosch). The impact in terms of the academic performance will be available in the next reporting period. Armscor has donated 75 computers and related software to three schools in Prieska for learning purposes 15

3. REVIEW OF OPERATIONS 16

3.1 Review of Operations - Acquisition
MARITIME SYSTEMS Valour Class MEKO A – 200 Frigates: The present activities focused on the completion of the systems integration and performance acceptance of the 35/ 76mm Double Purpose Gun (DPG) system For the three commissioned Type 209 Submarines, during the period under review, the focus was on implementing required engineering changes that were a result of operational test and evaluation – to be completed during 2012 17

3.1 Review of Operations – Acquisition… continued
AIRBORNE SYSTEMS Light Utility Helicopter (LUH) - All 30 Helicopters are updated to the final production standard. Airbus A400 Strategic Heavy Lift Transport Aircraft - Airbus Military (ASML) has reimbursed Armscor with all the advanced payments plus interest and escalation. All the project orders have been closed. Gripen – Out of the 26, 22 have been delivered. The last four aircraft will be updated to the final functionality standard in Sweden and delivered to South Africa in August The integration of the A-Darter Missile has been completed Hawk – The fleet has been into full operational use by the SAAF and achieved the 1650 flying training hours during the financial year. Rooivalk – Out of the 11 aircraft, 6 were upgraded and delivered. Upgrade of the five MK1 Rooivalk was completed during the year under review. The 5 will be delivered during April 2012 18

3.1 Review of Operations – Acquisition… continued
39 Oryx Medium Transport Helicopter (MTH’s) are being upgraded by DENEL Aviation with a new navigation system. The project was scheduled to be completed by July 2012 however, due to some delays the completion date is set for November 2014 A-Darter Missile development – Jointly funded by Brazilian Air Force. Programme is progressing well, but some delays have been experienced due to technical risks materializing. 19

3.1 Review of Operations – Acquisition … continued
LANDWARD SYSTEMS Ground Based Air Defence System – Subsequent to the delays as a result of technical problems, the programme is back on track. The development and delivery of the of the new Local Warning Segment of the Ground Based Air Defence System has been successfully completed and qualified for delivery to the SA Army. New Generation Infantry Combat Vehicle – The locally developed 30mm Camgun is undergoing final environmental test and evaluation . Assembly of the two Section Variant Turrets are completed. The Design Test and Evaluation of the Section Variant is planned to start mid-2012. 20

3.2 Review of Operations – Research and Development
RESEARCH AND DEVELOPMENT PROGRAMMES Aerospace Technology - The technology demonstrator of the Precision Bomb Guidance Kit attached to existing bombs was successfully tested in June The Technology has matured enough to implement. This technology demonstrator has established the technology base for the manufacture of low cost precision guidance bomb kits in local industry. Support Technology - the BIO-CHEM (Biological and Chemical) Laboratory technology demonstrator for field experimentation was completed. The technology is handed over to and used by SAMHS 21

3.3 Review of Operations - Dockyard
The Dockyard - Despite its challenges of insufficient funding, the Dockyard achieved 88% compliance against agreed performance target of 90% A decision was taken to conduct a feasibility study to fully assess the state of the Dockyard and the requirements to turn it into a world – class facility capable of meeting all requirements of the SA Navy as well as those of commercial business. 22

3.4 Armscor Finances Armscor Group – 2011/12 Financial Overview
Net asset value (Shareholder’s interest) increased with 13.2% to R million due to surplus for the period Total revenue increased by 6.1% to R1,07 billion. FACTORS THAT INFLUENCED THE FINANCIAL POSITION POSITIVELY Increase in allocation for operating expenditure as a result of payment for services rendered due to scope increase Reduced spending on other expenses as a result of continuous effort to reduce costs and increase efficiency, e.g. personnel costs as only some critical positions were filled Strategic decision to delay IT related expenditure Increase in investment revenue generated Actuarial gain recognised from post-retirement medical benefit 23

4. CORPORATE PERFORMANCE
24

4.1 Corporate Performance against Goals
25

Strategic Objectives in terms of the SLA
4 out of the 6 objectives have been achieved, 2 slightly underperformed Objectives 1 – 3 : Measure effectiveness of acquisition function in terms of: Contracts to be placed: commitment of funds Achieved cash flow against formally planned cash flow i.t.o. of commitments Achieved goals except for Category 1materiel where slightly underperformed OBJECTIVES MEASURING FUNCTIONS IN TERMS OF SLA Objective 4: Management of Defence Industrial Participation: Execution of DIP obligations Objective achieved Objective 5 : Management & Execution of Defence Technology, Test and Evaluation requirements for DOD: Execution by Armscor Defence Institutes of contractual milestones/ deliveries Objective achieved Objective 6 : DOCKYARD Management and performance against Dockyard mandate Objective not fully achieved, 88% vs 90% 26

Strategic Objectives 1- 3
Most objectives were achieved. The areas of EE and BEE will focus more on gender Strategic objective 1 – Funding & Growth Measure the expenditure compliance and effort to secure sufficient funding to sustain the organisation. Objective achieved ACHIEVEMENT OF STRATEGIC GOALS Strategic objective 2 – People & Capabilities Measuring Armscor’s ability to attract and retain employees through a positive organizational environment. Areas of improvement still required Strategic objective 3 – Broad Based Black Economic Empowerment Measure the spending in compliance with the BBBEE Act & Armscor’s BBBEE certification status Most areas achieved although areas such as spending on women owned entities still needs improvement 27

ACHIEVEMENT OF STRATEGIC GOALS
Strategic Objectives 2 Objectives were achieved, and 1 not achieved . Strategic objective 4 – Stakeholder Relationships Measure the relationships with stakeholders & Armscor’s compliance to good governance Objective relating to unqualified annual report achieved ACHIEVEMENT OF STRATEGIC GOALS Strategic objective 5 – Local Industry Measure the support to the local industry Objectives not achieved as spending on local industry was affected by large foreign payments Strategic objective 6 – Operational Efficiency Measure the operational efficiency of Armscor. Objectives achieved 28

4.2 Challenges 29

Challenges Financing the Corporation
Current funding model – remain limitation as transfer payment for operating expenditure increase based on fixed percentage irrespective of increase in cost base (consisting mainly of personnel cost increasing at higher rate) This has influence on : Ability to rejuvenate workforce Renewal of infrastructure (IT application systems) Maintaining technical capabilities required New funding model developed based on levying charges for services rendered 30

Challenges 2. Dockyard Insufficient funding of the Dockyard remains a challenge. This has led to challenges of insufficient capacity and capability. A due diligence study is undertaken 3. Management of DIP obligations The focus was more on sales than on technology transfer/ investment This made it difficult to show impact on economy. 4. Transformation of defence sector Foreign majority share ownership in SA Defence companies Reluctance by industry to implement employment equity Reluctance by industry to implement BBBEE 31

THANK YOU QUESTIONS? 32

STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2012 ASSETS
33

STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2012 EQUITY AND LIABILITIES
34

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2012
35

ARMSCOR GROUP 36

ARMSCOR GROUP 37

4.2 Corporate Performance against Goals
38

Measurement of Performance against Armscor Group Corporate Objectives
Objective 1: Capital defence materiel acquisition excluding strategic defence acquisition but including technology acquisition (projects) Key performance indicator Goal Achieved Performance against Goal Contracts to be placed by Armscor. Armscor’s target of 90% 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. 90% 89.05% DOD requirements to the value of Rm were received. Armscor committed Rm of the above mentioned funds resulting in an achievement of % against the set target of 90%. Objective not achieved. 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. Actual cash flow will be measured against planned cash flow in terms of first revision and adjusted for factors beyond Armscor’s control. Furthermore, cash flow is updated on an on-going basis with commitments during year. 86.21% The agreed planned cash flow for the financial year in order to execute the orders placed amounted to Rm Armscor managed to realise cash flow to the value of Rm resulting in an achievement of 86.21% against the set target of 90%. Objective not achieved as large multi-year orders could not be placed in time. 39 39

Objective 2: Strategic defence acquisition (Strategic Defence Packages) Key performance indicator Goal Achieved Performance against Goal Contracts to be placed by Armscor. Armscor’s target of 90% 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. 90% 100% DOD requirements to the value of Rm were received. Armscor committed Rm of the above mentioned funds resulting in an achievement of 100% against the set target of 90%. Objective achieved. Cash flow. 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. Actual cash flow will be measured against planned cash flow in terms of first revision and adjusted for factors beyond Armscor’s control. Furthermore, cash flow is updated on an on-going basis with commitments during year. 94.39% Formally planned cash flow for the financial year amounted to Rm Armscor managed to realise cash flow to the value of Rm resulting in an achievement of 94.39% against the set target of 90%. Objective achieved. 40 40

Objective 3: System support: Acquisition & procurement (Operational funds) Key performance indicator Goal Achieved Performance against Goal Contracts to be placed by Armscor. Armscor’s target of 90% 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. 90% 98.83% DOD requirements received to the value of Rm Armscor committed Rm of the above mentioned funds resulting in an achievement of 98.83% against the set target of 90%. Objective achieved. Cash flow. 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. Actual cash flow will be measured against planned cash flow in terms of first revision and adjusted for factors beyond Armscor’s control. Furthermore, cash flow is updated on an on-going basis with commitments during year. 100.1% Formally planned cash flow for the financial year amounted to Rm Armscor managed to realise cash flow to the value of Rm resulting in an achievement of 100.1% against the set target of 90%. Objective achieved. 41

Objective 4: Management of Defence Industrial Participation (DIP): A certain percentage of counter performance is negotiated by Armscor with overseas suppliers on all contracts in excess of USD 2m. The management of these counter performances is included as an objective for Armscor, and the target is reflected in the following table: Key performance indicator Goal Achieved Performance against Goal Value of DIP credits to be granted to overseas suppliers. R331m credits to be approved by R1 445m DIP credits to the value of R1 445m (436.38%) have been awarded during the 2011/12 financial year. Objective achieved. Annual planning figures are based on DIP agreements related to current acquisition programmes and exclude pro-active agreements. Pro-active activities occur randomly and cannot be predicted or pre-planned. The excessive over-achievement results from pro-active credits approved during the reporting period. 42

Objective 5: Management & execution of defence technology, research, test and evaluation requirements of DOD Key performance indicator Goal Achieved Performance against Goal Armscor Defence Institutes to achieve contractual milestones / deliveries as per agreed Memoranda of Agreement and orders received for the financial year. 90% 95.5% Armscor Defence Institutes managed to deliver / render services to the value of R186 217 717 against the contractual milestones / deliveries as per agreed Memoranda of Agreement and orders received for the financial year with a value of R194 950 762. This results in an achievement of 95.5% against the set target of 90%. Objective achieved. 43

Objective 6: Management and performance against Dockyard mandate (SA Navy / Dockyard performance management in terms of service level agreement with the SA Navy agreement) Key performance indicator Goal Achieved Performance against Goal Armscor Dockyard to achieve 90% compliance with the performance agreement indicators and deliverables. 90% 88% Combined performance against agreed performance indicators. Some areas of partial performance influenced by non-availability of Customer Furnished Equipment and other services to be supplied by Client which influenced delivery dates. Objective not achieved. Dockyard to ensure the necessary technical training support for SA Navy employees as and when required. 90% compliance with SA Navy requirements. 100% Full compliance to SA Navy training support requests (12 students trained and the Dockyard Workshop Facilities supplied training for 22 SA Navy employees). Objective achieved. 44

Strategic Objective 1: Funding and Growth Key performance indicator Goal Achieved Performance against Goal No over-expenditure on Armscor’s approved operational budget. 0% over expenditure 4.8% under expenditure Total operating expenditure budgeted: Planned: R895.4m Total operating expenditure incurred: Achieved: R852.6m Objective achieved. Reduction of budgeted deficit through additional funding / cost reduction / efficiency improvements (2010/2011 baseline – R61.6m). 60% reduction in approved 2010/11 baseline (R24.6m) 331.6% achieved Approved budget: Planned: R25.0m deficit Achieved R57.0m surplus (excluding positive contribution from medical continuation fund). 45

Strategic Objective 2: People and capabilities Key performance indicator Goal Achieved Performance against Goal Employee satisfaction measurement. (2010/11 baseline used for measurement) 64% 62.9% Although goal was not achieved an improvement from 61.9% to % was achieved. Objective not achieved. Compliance with plan to align preferred corporate culture with current corporate culture. 90% 97.9% Compliance as on 31 March 2012. Objective achieved. Staff turnover in technical positions (excluding retirements). < 4.5% 2.37% 16 resignations from technical positions for the financial year. 46

Strategic Objective 2: People and capabilities (continued) Key performance indicator Goal Achieved Performance against Goal Improve the demographic profile of Armscor to reflect the national and regional demographic profile. % of external appointees to be black. 85% 97.67% 43 appointments were black. Objective achieved. % of external appointments in the technical functional groups to be women. 25% 24 appointments: 6 females. % of external appointments in the non-technical functional groups to be women. 65% 52.63% 19 appointments: 10 females. Objective not achieved. 47

Strategic Objective 2: People and capabilities (continued) Key performance indicator Goal Achieved Performance against Goal % of employees in the supervisory levels and above to be women. 33% 29.70% 744 STS and above: 221 females. Objective not achieved. Grant bursaries to tertiary level students in line with Armscor’s strategic manpower plans. 10 students 11 students 11 tertiary students were granted bursaries. Objective achieved. Have trainees under the Talent Development Programme. 15 trainees 13 trainees A total of 13 people went through the Talent Development Programme for the 2011/12 financial year. 48

Strategic Objective 3: Broad Based Black Economic Empowerment Key performance indicator Goal Achieved Performance against Goal Increase spending on BEE companies in terms of BBBEE Codes of Good Conduct as specified per category (based on recognition levels): Armscor: Operating budget. > 75% 95.43% Spending on the operating budget achieved 95.43% against a target of 75%. (Total purchases excluding parastatals is R The total spent on BBBEE companies was R23 ) Objective achieved. Spend on QSE’s. > 15% 30.75% Total spend: R Total BBBEE spend on QSE companies: R 49

Strategic Objective 3: Broad Based Black Economic Empowerment (continued) Key performance indicator Goal Achieved Performance against Goal Armscor (continued): Spend on EME’s. > 15% 20.53% Total spend: R Total BBBEE spend on EME companies: R Objective achieved. Spend on entities in which black designated groups have more than 50% economic interest. > 9% 38.40% Total BBBEE spend on companies in which black designated groups have more than 50% economic interest: R9 Spend on entities in which black women hold more than 30% economic interest. > 6% 28.31% Total BBBEE spend on companies in which black women hold more than 30% economic interest: R 50

Strategic Objective 3: Broad Based Black Economic Empowerment (continued) Key performance indicator Goal Achieved Performance against Goal Armscor Defence Institutes: Operating budget (operating cost, discretionary cost of sales and capital acquisition). > 55% 79% Spending on cost of sales, operating expenses and capital achieved 79%. The target was based on cost of sales, operating expenses and capital which amounted to R calculated on the ground rules for BBBEE spending. The total spent on BBBEE companies was R Objective achieved. Spend on QSE’s. > 15% 15% Total spend: R Total BBBEE spend on QSE companies: R Spend on EME’s. > 12% 28.31% Total BBBEE spend on EME companies: R 51

Strategic Objective 3: Broad Based Black Economic Empowerment (continued) Key performance indicator Goal Achieved Performance against Goal Armscor Defence Institutes (continued): Spend on entities in which black designated groups have more than 50% economic interest. > 9% 11% Total spend: R Total BBBEE spend on companies in which black designated groups have more than 50% economic interest: R11 There are not many entities in which black designated groups have more than 50% economic interest able to deliver the specialised required services and products to Armscor Defence Institutes. This has been elevated as a corporate risk. Objective achieved. Spend on entities in which black women hold more than 30% economic interest. > 6% 3.34% Total BBBEE spend on companies in which black women hold more than 30% economic interest: R There are not many entities in which black women holds more than 30% economic interest able to deliver the specialised required services and products to Armscor Defence Institutes. This will be a focus area during the following year. Objective not achieved. 52

Strategic Objective 3: Broad Based Black Economic Empowerment (continued) Key performance indicator Goal Achieved Performance against Goal Dockyard: Operating budget. > 60% 85.73% Spending by Armscor Dockyard achieved 85.73% against a target of 60%. Total expenditure of R The total spent on BBBEE companies was R Objective achieved. Spend on QSE’s. > 15% 8.13% Total spend: R Total BBBEE spend on QSE companies: R Objective not achieved. Spend on EME’s. > 12% 69.42% Total BBBEE spend on EME companies: R 53

Strategic Objective 3: Broad Based Black Economic Empowerment (continued) Key performance indicator Goal Achieved Performance against Goal Dockyard (continued): Spend on entities in which black designated groups have more than 50% economic interest. > 9% 15.03% Total spend: R Total BBBEE spend on companies in which black designated groups have more than 50% economic interest: R5 Objective achieved. Spend on entities in which black women hold more than 30% economic interest. > 6% 8.41% Total BBBEE spend on companies in which black women hold more than 30% economic interest: R 54

Strategic Objective 3: Broad Based Black Economic Empowerment (continued) Key performance indicator Goal Achieved Performance against Goal SDA & GDA accounts: Special Defence Account and General Defence Account. > 40% 82% Spending on the SDA and GDA accounts achieved 82% against a target of 40%. (The target refers to BBBEE expenditure as a percentage of total acquisition project expenditure. R is the net figure excluding exemptions for the year and the BBBEE expenditure was R ). Objective achieved. BEE certification status: Improve Armscor’s BBBEE certification status. Level 6 Self-assessment by Armscor BEE Division. Note: Actual spending based on BBBEE recognition levels of up to 135%. 55

Strategic Objective 4: Stakeholder Relationships Key performance indicator Goal Achieved Performance against Goal Stakeholder survey involving stakeholders (reputation index). Determine baseline Baseline not finalised Stakeholder engagement strategy being reviewed in line with strategic direction. Objective not achieved. Armscor to obtain unqualified audit report and not to receive negative audit report matters. Unqualified report with not more than 3 audit report matters after final audit by the Auditor-General Unqualified audit opinion An unqualified audit report was received. Objective achieved. 56

Strategic Objective 5: Local Industry Key performance indicator Goal Achieved Performance against Goal Satisfaction survey. Determine baseline Baseline not finalised Satisfaction survey not conducted. Objective not achieved. Increase % of local industry spent in respect of Special Defence Account and General Defence Account managed by Armscor (increase based on previous year spending). 5% (15,6%) 2010/2011 spending: R5.06bn on local suppliers: 82% R1.08bn on foreign suppliers: 18% 2011/12 spending: R4.506bn on local suppliers: 70.53% R1.88bn on foreign suppliers: 29.46% Figures include Dockyard orders / local orders and overseas orders. Objective not achieved due to large payments for Gripen Aircraft. 57

Strategic Objective 6: Operational Efficiency Key performance indicator Goal Achieved Performance against Goal Increase operational efficiency in terms of model developed. 6.25% 4.49% 5.29% 4.04% Direct cost as % of services rendered (cash- flow) - actual of 5.29% vs. 6.25% budgeted. Direct cost as % of services rendered (contracts placed) - actual of 4.04% vs % budgeted. Objective achieved. Direct cost is less due to a 4.2% saving in personnel related expenditure. It relates to the moratorium on the filling of vacancies not deemed absolute critical for operations; delays in the filling of some of those critical vacancies; the reduced contribution by the employer to the post-retirement medical benefit fund as a surplus already exists, as well as the growth in the net post-retirement medical benefit asset. 58

ARMSCOR ANNUAL REPORT 2011/12 PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS MR SIPHO MKWANAZI – ACTING CEO.

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ARMSCOR ANNUAL REPORT 2011/12 PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS MR SIPHO MKWANAZI – ACTING CEO.

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Presentation on theme: "ARMSCOR ANNUAL REPORT 2011/12 PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS MR SIPHO MKWANAZI – ACTING CEO."— Presentation transcript:

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