1. PRESENTATION TO THE PORTFOLIO ON PUBLIC ENTERPRISES
Broad-Based BEE
31 AUGUST 2005

2. Table of Contents Overview Actual/Plan Preferential Procurement
Challenges
Summary and way forward
Questions

3. Overview
Denel (Pty) Ltd - Global supplier of world-class Aerospace and Defense Systems
Turnover 2003/4 R4,4b with a procurement budget of R2,4b

4. Overview - Abbreviations
BEE - Black Economic Empowerment
BBBEE - Broad Based Black Economic Empowerment
DIP – Defence Industrial Participation
NIP – National Industrial Participation
PPPFA - Preferential Procurement Policy Framework Act
R&D – Research And Development
SOEPF – State Owned Enterprise Procurement Forum

5. Actual / Plan

6. Actual / Plan
Discretionary spend represents Total Procurement less the following: Imports, Capex (OEM), Intergroup Procurement , Telkom & Municipal Services
Total BEE Spend in Financial year 2004/2005 represented more than 10% (R138m) of the discretionary spend
The target is to achieve the BEE spend on direct materials of 15% (R138m) and then 20% (R210m) for the 2005/2006 and 2006/2007 respectively
The target is to achieve the BEE spend on indirect materials of 70% (R236m) and 90% (R326m) for the 2005/2006 and 2006/2007 respectively

7. Actual / Plan

8. Actual / Plan
“Direct Materials spend” relates to materials used in Denel’s core products.
Of the total 2004/2005 direct spend (R765m), Denel awarded 13,8% (R105m) to BEE suppliers

9. Actual / Plan

10. Actual / Plan
“Indirect Materials spend” relates to materials/services used in Denel to support production of core products.
Of the total 2004/2005 indirect spend (R435m), Denel awarded 7,68% (R33m) to BEE suppliers

11. Actual / Plan

12. Actual / Plan
The previous slide displays the spread of the BEE spend among the Black Enterprises, Black Empowered and Black Influenced suppliers
The majority of total BEE spend is awarded to black empowered suppliers

13. Actual / Plan
The status of all the suppliers that claim to be BEE is in the process of being verified
The verification process was conducted by Denel’s own resources as well as external verification agencies
Currently 5% (418) of the total supplier base of 7845 is BEE and has been verified

14. Actual / Plan

15. Actual / Plan

16. Actual / Plan

17. Actual / Plan
In the year 2004/2005 women spend represented 3% (R40m) of total discretionary spend.
The plan is to achieve spend 6% (R75m) and 9% (R127m) for the years 2005/2006 and 2006/2007 respectively

18. Actual / Plan

19. Actual / Plan
72% (R29m) of total spend on women was awarded to white women while black women were awarded 28% (R11m)
With the focus on indirect materials allocated to BEE companies, women owned companies will be the major beneficiaries
It is noted that the majority of “white woman” owned companies are controlled by white males previously employed by Denel

20. Preferential Procurement
The target is to achieve the BEE spend on indirect materials of 70% (R236m) and 90% (R326m) for the 2005/2006 and 2006/2007 respectively
Set aside opportunities for all employees who are facing retrenchments in accordance with the Denel Development Agency’s objectives

21. Challenges Common Information Technology system in Denel
Changing mindset towards BEE suppliers
Reaching BEE suppliers in the direct material spend
Spreading Denel’s spend to rural suppliers. Currently Denel business are mainly in Gauteng and Western Cape and North West.
Limited financial resources for supplier development activities
Denel’s cash flow and timeous payment of BEE suppliers

22. Challenges International Companies dictate suppliers from overseas
Airbus (Hexcel, UTi, etc.)
SAAB (Customer furnished materials etc.)
Local Agents appointed by our clients
Decentralization / Centralization
Pre April 2004 – Resistance to change
Post April Instability in Denel
Lag of DIP and NIP by international companies
Lack of awareness/support for the Denel Social Office

23. Summary and way forward
To improve the Broad Based BEE performance, the following is envisaged:
Supplier development activities will be resourced adequately
Involve BEE suppliers in the supplier day forums
Involve BEE suppliers in the conceptual stages of different programmes/products, R&D
Continue with verification to remove fronting
Roll out of BBBEE scorecard approach and PPPFA in the tender adjudication process in the various business units of Denel
Networking via other SOE’s to share information and best practices - SOEPF
Defense Related Industries Charter underway

26. Thank You