by Simphiwe Hamilton, Executive Director

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AMD PRESENTATION TO THE PARLIAMENTARY PORTFOLIO
COMMITTEE ON DEFENCE 26 JUNE 2007
by Simphiwe Hamilton, Executive Director AMD
A STRONG DEMOCRACY NEEDS THE SUPPORT OF A STRONG
DEFENCE INDUSTRY
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PURPOSE SCOPE OF PRESENTATION

• PURPOSE
• To brief the Committee on the current state of
  the defence industrial environment and its
  possible futures.
• SCOPE
• Overview of the evolving SADRI position on key
  developments within the defence landscape on each
  of the areas listed below
• Denel restructuring
• Armscor restructuring
• Formation of a Defence Evaluation and Research
  Institute
• Acquisition Processes and Industrial
  Participation and
• Defence Industrial Development Strategy.

IN SUPPORT OF PEACE AND SECURITY IN AFRICA
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SADRI MEMBERSHIP IN AMD
The South African Defence Related Industries
(SADRI) is a cluster of those organisations in
the South African Private and Public Sector which
are directly or indirectly involved in activities
related to the industrial and trade processes of
defence related materials, goods and services.
Members of AMD TOTAL 42
CLASS A COMPANIES Yearly Turnover More Than
R250M
CLASS B COMPANIES R50MltYearly TurnoverltR250M
CLASS C D COMPANIES R10MltYearly TurnoverltR50M
ASSOCIATE MEMBERS Vested Defence Interest
CLASS E SPECIAL MEMBERS Yearly Turnover less
than R10M
AMD REPRESENTS 92 97 OF DEFENCE TURNOVER
EXPORTS RESPECTIVELY (2005).
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AMD INTERNAL STRUCTURE
AMD OFFICE
AMD BOARD EXECUTIVE
AMD BOARD
CHAIRPERSON Khapametsi Maleke (BAE OMC)

• Nominated Members
• CEOs

EXECUTIVE DIRECTOR Simphiwe Hamilton
DEPUTY CHAIRPERSON Alan Holloway (ANSYS
Systems)

• Leona Redelinghuys
• Magda Cloete

HON. TREASURER Colin Meintjes (TELLUMAT)
HON. SECRETARY William Makwinja (LECHABILE)
PORTFOLIO COMMITTEES
STRATEGY / PLANNING
SMME / BEE
MARKETING

• Vacant

• Lorris Duncker, ATE

• Simphiwe Hamilton, AMD

AMD HAS BEEN REVITALSED TO MORE EFFECTIVELY
REPRESENT SADRI
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AMD PROGRAMME OF ACTION (POA) FOR 2007
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AMD POA OUTCOMES
AMD VISION

• To facilitate a flourishing Defence-Related
  Industry in support of the SA Government
  imperatives.

AMD VISION
AMDs mission is to promote, protect and support
the collective interests of its members in
particular and the broader industry in general.
SADRI COMMON INTERESTS

• Profitability sustainability
• Certainty of planning (content horizon)
• Home market advantages (incl. RD, preferential
  access)
• Government Support for Export (Political support)
• Responsible corporate citizenship

A SADRI VISION IN SERVICE OF THE RSAS DEFENCE
REQUIREMENTS
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AMD POA OUTCOMES, continued
AMD Representation in DoD fora (AASB, Policy Review, DIP etc.) Reinstatement active participation by Dec 2007 (Chair, ED Strategy Chair)
SA Defence Industrial Strategy Participate in support government led process Ongoing (Chair, ED Strategy Chair)
SADESO, DEPS NCACC Articulate AMD position, SADRI requirements Ongoing (ED Marketing Chair)
Parliamentary Com on Defence Facilitate feedback, regular interaction and info flow by Dec 2007 (Chair, ED Strategy Chair)
SADRI Transformation Alignment adoption of SADRI BBBEE Charter by Dec 2007 (ED BEE Chair)
AMD Structure Capacity Research Capacity by May 2007, adapt structures as required continuous (ED)
Improved Website, Year Planner Presentation Update, pilot and finalise by May 2007 (ED Marketing Chair)
AMD image and visibility Publications, seminars related events continuous (Chair, ED Strategy / Marketing Chair)
AMD Stakeholder outreach Meaningful stakeholder engagement continuous (ED Co-ordinates)
AMD Membership Fee Structure approval Mar 2007, scaled fee structure Mar 2008 (ED HT)
AMD ONE VOICE FOR A UNIFIED SADRI
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SADRI POSITION ON KEY DEVELOPMENTS
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SADRI CONTRIBUTION TO KEY GOVERNMENT OBJECTIVES

• The SADRI is well poised to significantly
  contribute to South Africas key national
  objectives as articulated by Pres. T.M. Mbeki in
  his 2007 State of the Nation Address
• Promoting the growth of the SMME business sector
  
• Skills development
• Improving export performance, focusing on
  services and manufacturing
• Increasing the spend on scientific research and
  development
• Promoting BEE
• Improving safety and security of all citizens and
  communities and
• Accelerating the process of renewal of the
  African continent

SADRI COMMITTED TO A SAFE, SECURE DEVELOPING
SOUTH AFRICA
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BACKGROUND TO POSITION PAPER

• SA Defence Industrial Environment interventions
  by the SA government are understood to be
  arranged into Inter- Ministerial Committees (IMC)
  that focus on the following
• Denel restructuring
• Armscor restructuring
• Formation of a Defence Evaluation and Research
  Institute
• Acquisition Processes and Industrial
  Participation and
• Defence Industrial Development Strategy.

FROM DYSFUNCTIONALITY TO SUSTAINABILITY IN ALL
SPHERES
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BACKGROUND TO POSITION PAPER, cont.

• This restructuring is occurring within the
  context of two important events
• AMD commissioned SADRI Feasibility Study of
  which the results were presented to the
  Parliamentary Committee on Defence on the 12th of
  September 2006.
• Defence Update
• Clarity must be attained as to what aspects of
  the defence policy framework are being reviewed
  how these impact on SADRI.
• The DoD should involve the SADRI and other
  stakeholders in a process of meaningful
  participation to ensure the legitimacy of the
  process as well as to ascertain the requirements
  that may emanate from these stakeholders.

PARTICIPATION IS A TENET OF LEGITIMACY
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IMC 1 DENEL RESTRUCTURING

• Characterised by the disposal on non-core assets
  and the attraction of credible technology
  partners, the restructuring of DENEL is a
  multi-pronged approach aimed at returning this
  company to sustainability and profitability
  whilst urging for the establishment of home
  market advantages for the SADRI as a whole.
• RECOMMENDATION
• A comprehensive feedback session be facilitated
  for the DENEL to interact with the broader SADRI
  and to report on the progress to date. Need to
  verify impact of this process on SADRI as well as
  on strategic capabilities as identified by the
  SANDF.

DENEL NEEDS THE SADRI IN AS MUCH AS THE SADRI
NEEDS DENEL
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IMC 2 ARMSCOR RESTRUCTURING

• In the past few years, Armscor has been through
  various challenges ranging from the changes in
  the Act that governs its activities to the recent
  attempts at restructuring of the organisation.
• RECOMMENDATION
• SADRI be afforded an opportunity to at least
  remain officially and regularly informed of the
  developments in this arena to prevent uncertainty
  and misinformation that tends to accompany lack
  of official information and non-participation.

ARMSCOR A KEY PARTNER IN SADRIS ABILITY TO
DELIVER
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IMC 3 FORMATION OF A DERI

• Government has decided to form a Defence
  Evaluation and Research Institute (DERI) out of
  the relevant capabilities that reside in Denel,
  the CSIR and Armscor (Business). The primarily
  responsibility of the DERI is that of conducting
  of basic research as well as tests evaluations
  in specified areas on behalf of the SANDF.
• RECOMMENDATIONS
• AMD supports this process recommends adherence
  to the following basic principles
• SADRI involvement in the process should be
  established at a meaningful level.
• The DERIs mandate, scope and parameters be
  clearly defined.
• Measures should be put in place to ensure that
  the DERI does not compete with industry that
  regulatory hand over mechanisms are in place.
• Measures be put in place that the research
  activities undertaken by the DERI are clearly
  guided by the SANDF requirement and that where so
  desired an attendant local industrial capability
  is in place in good time to be able to meet the
  requirements of the SANDF.

RD IS A KEY INPUT TO SADRI COMPETITIVENESS
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IMC 4 ACQUISITION PROCESS INDUSTRIAL
PARTICIPATION

• Of all the intervention processes, this seems to
  be least spoken of and is one in which AMD has
  little to no insight.
• RECOMMENDATIONS
• AMDs recommendation in this regards is that
  clarity should first be attained on the status of
  this intervention and to secure its involvement
  in the process as it directly impacts on the
  SADRIs sustainability.
• The key guiding principles in this regards are as
  follows
• The continued commitment to existence of a robust
  acquisition process that separates the user from
  the buyer and ensures the objective adjudication
  of competing bids whilst adopting emerging
  acquisition practices like incremental
  acquisition, technology infusion, partnership
  with industry and the creation of a home market
  for local industry
• The visibility of short, medium and long term
  planning priorities.
• The deliberate implementation of the tenets and
  provision of the White Paper on Defence Related
  Industries particularly with regards to strategic
  capabilities, regular interaction between the
  Arms Acquisition Board and organised industry to
  provide a long term view on acquisition planning
  and the nurturing of local defence industry
  capabilities.
• The review of risk mitigation strategies as
  applied in the acquisition of capital equipment
  in the recent past especially the preference for
  foreign military off the shelf equipment whilst
  disregarding the implications in terms of the
  complete life cycle costs.
• The utilisation of industrial participation as an
  integral part of the acquisition process to
  achieve mutually agreed strategic objectives
  particularly those related to the development and
  sustainment of world class defence industrial
  capabilities within the SADRI.

ACQUISITION IS A KEY LEVER FOR TRANSFORMATION
SUSTAINABILITY
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IMC 5 DEFENCE INDUSTRIAL DEVELOPMENT STRATEGY

• This process is led by the Department of Public
  Enterprises with the participation of the DoD,
  the dti, the DST, DENEL and AMD as paying
  partners.
• AMD participated as a paying partner and a
  legitimate stakeholder.
• Final interpretation, packaging and
  recommendations to Cabinet and Parliament being
  compiled without SADRI/AMD participation
• RECOMMENDATIONS
• It is recommended that a fully fledged, commonly
  understood and accepted defence industry strategy
  that addresses at least the following aspects, be
  developed
• The role and importance of the SADRI as an
  integral element of the SANDFs defence
  capability
• The identification of strategic defence
  industrial capabilities and indications of
  mechanisms to establish, sustain and enhance
  these
• The alignment of the defence related (defence
  affecting) mandates of the DoD, the dti and the
  DST
• The establishment of a home market for the
  SADRI
• The mechanism for the formulation, implementation
  funding of the capital technology acquisition
  strategy and
• The importance of defence exports and the
  requisite mechanism and resources for the support
  of the SADRI.

STRATEGY AS A GUIDE TO A COMMON PROSPEROUS
FUTURE
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SUMMARY CLOSURE

• AMD supports and appreciates the SA Government
  efforts to ensure the sustainability of the SADRI
  and will co-operate with these efforts those of
  this Committee in ensuring that the concerns and
  inputs of all key stakeholders are meaningfully
  considered as part of this process. The focus is
  on
• Participation
• Relationship and
• Impact.

DEFENDING DEMOCRATIC GOVERNANCE AND PARTICIPATION