PRESENTATION TO THE PORTFOLIO COMMITTEE ON DEFENCE

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THE ARMSCOR ANNUAL REPORT 2005/06

• PRESENTATION TO THE PORTFOLIO COMMITTEE ON
  DEFENCE
• 12 SEPTEMBER 2006

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INTRODUCTION

1. Armscor budget situation
2. Acquisition management
3. SANDF logistics support
4. DoD strategic facilities management
5. Defence Industry support
6. Employment equity support

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1. THE ARMSCOR BUDGET SITUATION

• OPERATIONAL BUDGET
• SPECIAL DEFENCE BUDGET
• GENERAL DEFENCE BUDGET

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1.1 ARMSCOR GROUP OPERATIONAL BUDGET 2005 / 2006
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1.2 ARMSCOR GROUP OPERATIONAL BUDGET 2005/2006
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1.3 ACQUISITION BUDGET FOR 2005/06
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1.4 ACQUISITION ACTIVITIES 2005 / 2006
NOTES ON VARIATIONS SPECIAL DEFENCE ACCOUNT
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2. ACQUISITION MANAGEMTN GOALS

• SPECIAL DEFENCE ACCOUNT BUDGET
• GENERAL DEFENCE ACCOUNT BUDGET

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PERFORMANCE AGAINST ACQUISITION GOALS
MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.1 PATROL CORVETTE MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.1 PATROL CORVETTE MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.1 PATROL CORVETTE MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.1 PATROL CORVETTE
BACKGROUND Acquisition of 4 x MEKO A-200 Patrol Corvettes from the European South African Corvette Consortium (German Frigate Consortium, Thales Navale ADS). Program value of R6.0 billion (1998 R-value). Contract placed during December 1999. Platforms constructed in 2 German shipyards Platform construction programme commenced January 2000. Platforms delivered to RSA November 2003 to September 2004. Combat suites integrated onto platforms in RSA December 2003 to December 2006. Acquisition program completion January 2008. BACKGROUND Acquisition of 4 x MEKO A-200 Patrol Corvettes from the European South African Corvette Consortium (German Frigate Consortium, Thales Navale ADS). Program value of R6.0 billion (1998 R-value). Contract placed during December 1999. Platforms constructed in 2 German shipyards Platform construction programme commenced January 2000. Platforms delivered to RSA November 2003 to September 2004. Combat suites integrated onto platforms in RSA December 2003 to December 2006. Acquisition program completion January 2008. BACKGROUND Acquisition of 4 x MEKO A-200 Patrol Corvettes from the European South African Corvette Consortium (German Frigate Consortium, Thales Navale ADS). Program value of R6.0 billion (1998 R-value). Contract placed during December 1999. Platforms constructed in 2 German shipyards Platform construction programme commenced January 2000. Platforms delivered to RSA November 2003 to September 2004. Combat suites integrated onto platforms in RSA December 2003 to December 2006. Acquisition program completion January 2008. BACKGROUND Acquisition of 4 x MEKO A-200 Patrol Corvettes from the European South African Corvette Consortium (German Frigate Consortium, Thales Navale ADS). Program value of R6.0 billion (1998 R-value). Contract placed during December 1999. Platforms constructed in 2 German shipyards Platform construction programme commenced January 2000. Platforms delivered to RSA November 2003 to September 2004. Combat suites integrated onto platforms in RSA December 2003 to December 2006. Acquisition program completion January 2008.
PROGRAM for 2005/06 PROGRAM for 2005/06 FINANCIAL FINANCIAL
OBJECTIVES PERFORMANCE OBJECTIVES PERFORMANCE
Contractual hand over of 1st Corvette (SAS Amatola) to Armscor Commissioning of 1st fully operational vessel Commencement of sea acceptance trials of combat suites of 2nd, 3rd 4th corvettes SAS Amatola handed over contractually December 2005 SAS Amatola commissioned on 16 Feb 2006 Sea acceptance trials commenced April 2005 to February 2006 Spend at least 92 of R531m Spent R414 m which is 78 of budget. Note Full planned amount paid to contractor, but savings i.r.o. statutory costs, Rate Of Exchange escalations
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PERFORMANCE AGAINST ACQUISITION GOALS
MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.2 SUBMARINE MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.2 SUBMARINE MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.2 SUBMARINE MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.2 SUBMARINE
BACKGROUND Acquisition of 3 x Type 209/1400 MOD Submarines from the German Submarine Consortium. Program value of R5.213 b (1998 R-value). Contract placed during December 1999. Submarines constructed in 2 German shipyards. Submarines delivered by Contractor November 2005 to August 2007 Construction programme commenced January 2000. Acquisition program completion August 2008. BACKGROUND Acquisition of 3 x Type 209/1400 MOD Submarines from the German Submarine Consortium. Program value of R5.213 b (1998 R-value). Contract placed during December 1999. Submarines constructed in 2 German shipyards. Submarines delivered by Contractor November 2005 to August 2007 Construction programme commenced January 2000. Acquisition program completion August 2008. BACKGROUND Acquisition of 3 x Type 209/1400 MOD Submarines from the German Submarine Consortium. Program value of R5.213 b (1998 R-value). Contract placed during December 1999. Submarines constructed in 2 German shipyards. Submarines delivered by Contractor November 2005 to August 2007 Construction programme commenced January 2000. Acquisition program completion August 2008. BACKGROUND Acquisition of 3 x Type 209/1400 MOD Submarines from the German Submarine Consortium. Program value of R5.213 b (1998 R-value). Contract placed during December 1999. Submarines constructed in 2 German shipyards. Submarines delivered by Contractor November 2005 to August 2007 Construction programme commenced January 2000. Acquisition program completion August 2008.
PROGRAM PROGRAM FINANCIAL FINANCIAL
OBJECTIVES PERFORMANCE OBJECTIVES PERFORMANCE
Completion of sea acceptance trials of 1st Submarine (S101) Commissioning of S101 in Germany Arrival of S101 in RSA Launching of 2nd Submarine (S102) in shipyard Completion of harbour acceptance trials of S102 Sea acceptance trials completed during September 2005 after a 3 month delay S101 commissioned on 03 November 2005 S101 arrived in RSA on 07 April 2006 S102 launched during April 2005 Harbour acceptance trials on S102 completed during March 2006 Spend at least 92 of R1243m Spent 92,4 or R1 149m Note 100 payment to contractor, but savings i.r.o. statutory costs, ROE escalations.
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PERFORMANCE AGAINST ACQUISITION GOALS
MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.3 MARITIME HELICOPTER MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.3 MARITIME HELICOPTER MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.3 MARITIME HELICOPTER MARITIME DEFENCE STRATEGIC DEFENCE PACKAGES 2.3 MARITIME HELICOPTER
BACKGROUND Acquisition of 4 Super Lynx 300 Mk 64 Maritime Helicopters from Agusta Westland UK to be operated from the Patrol Corvettes Program Value R788 m. Contract placed July 2004 Planned Program Completion Date Mid 2008 BACKGROUND Acquisition of 4 Super Lynx 300 Mk 64 Maritime Helicopters from Agusta Westland UK to be operated from the Patrol Corvettes Program Value R788 m. Contract placed July 2004 Planned Program Completion Date Mid 2008 BACKGROUND Acquisition of 4 Super Lynx 300 Mk 64 Maritime Helicopters from Agusta Westland UK to be operated from the Patrol Corvettes Program Value R788 m. Contract placed July 2004 Planned Program Completion Date Mid 2008 BACKGROUND Acquisition of 4 Super Lynx 300 Mk 64 Maritime Helicopters from Agusta Westland UK to be operated from the Patrol Corvettes Program Value R788 m. Contract placed July 2004 Planned Program Completion Date Mid 2008
PROGRAM PROGRAM FINANCIAL FINANCIAL
OBJECTIVES PERFORMANCE OBJECTIVES PERFORMANCE
Complete system definition and engineering Complete and prepare first helicopter to start flight test programme Start production of remaining 3 airframes System definition and Engineering phase completed and technical baseline established First helicopter completed and was ready to start test flights in April 2006 Production of the remaining 3 airframes started and is ahead of schedule Spend at least 92 of R217m Spent 92.2 or R200m Reduced spending due to exchange rate savings
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PERFORMANCE AGAINST ACQUISITION GOALS
AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.4 ADVANCED LIGHT FIGHTER AIRCRAFT AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.4 ADVANCED LIGHT FIGHTER AIRCRAFT AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.4 ADVANCED LIGHT FIGHTER AIRCRAFT AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.4 ADVANCED LIGHT FIGHTER AIRCRAFT
BACKGROUND Acquisition of 9 dual and 17 (previously 19) JAS39 Gripen Aircraft from BAE Systems/SAAB Consortium Planned Program Completion End 2012 Combined ALFA and LIFT program cost R10, 875 billion BACKGROUND Acquisition of 9 dual and 17 (previously 19) JAS39 Gripen Aircraft from BAE Systems/SAAB Consortium Planned Program Completion End 2012 Combined ALFA and LIFT program cost R10, 875 billion BACKGROUND Acquisition of 9 dual and 17 (previously 19) JAS39 Gripen Aircraft from BAE Systems/SAAB Consortium Planned Program Completion End 2012 Combined ALFA and LIFT program cost R10, 875 billion BACKGROUND Acquisition of 9 dual and 17 (previously 19) JAS39 Gripen Aircraft from BAE Systems/SAAB Consortium Planned Program Completion End 2012 Combined ALFA and LIFT program cost R10, 875 billion
PROGRAM PROGRAM FINANCIAL FINANCIAL
OBJECTIVES PERFORMANCE OBJECTIVES PERFORMANCE
Complete first production aircraft required for the flight test program Start flight testing First production aircraft completed in October 2005 First flight conducted on 11 November 2005 Spend 92 of R2 456m Spent 99.5 (R2 443m)
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PERFORMANCE AGAINST ACQUISITION GOALS
AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.5 LEAD-IN FIGHTER TRAINER AIRCRAFT AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.5 LEAD-IN FIGHTER TRAINER AIRCRAFT AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.5 LEAD-IN FIGHTER TRAINER AIRCRAFT AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.5 LEAD-IN FIGHTER TRAINER AIRCRAFT
BACKGROUND Acquisition of 24 Hawk 100 Aircraft from BAE, United Kingdom Contract placed December 1999 Combined ALFA and LIFT program cost R10 875b Planned Program Completion End 2008 BACKGROUND Acquisition of 24 Hawk 100 Aircraft from BAE, United Kingdom Contract placed December 1999 Combined ALFA and LIFT program cost R10 875b Planned Program Completion End 2008 BACKGROUND Acquisition of 24 Hawk 100 Aircraft from BAE, United Kingdom Contract placed December 1999 Combined ALFA and LIFT program cost R10 875b Planned Program Completion End 2008 BACKGROUND Acquisition of 24 Hawk 100 Aircraft from BAE, United Kingdom Contract placed December 1999 Combined ALFA and LIFT program cost R10 875b Planned Program Completion End 2008
PROGRAM PROGRAM FINANCIAL FINANCIAL
OBJECTIVES PERFORMANCE OBJECTIVES PERFORMANCE
Complete development phase of program Complete production, factory testing and acceptance of first 19 aircrafts Establish a training squadron at Air Force Base Makhado. Train SAAF air and ground crew on the HAWK aircraft Development completed for airframe, engine and avionics hardware. Avionics software not completed. Although 19 aircraft have been completed and factory tested, acceptance of the first 10 aircraft was delayed to May 2006 85 Flying School was established as training squadron at Air Force Base Makhado. Ground crew training and aircrew training completed in 2005. Spend at least 92 of R1 163m budget Spent 17 or R198m Under expenditure due to non-completion of avionics software.
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PERFORMANCE AGAINST ACQUISITION GOALS
AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.6 LIGHT UTILITY HELICOPTER AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.6 LIGHT UTILITY HELICOPTER AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.6 LIGHT UTILITY HELICOPTER AIR DEFENCE STRATEGIC DEFENCE PACKAGES 2.6 LIGHT UTILITY HELICOPTER
BACKGROUND Development and production of 30 A109LUH light utility helicopters, from AgustaWestland, Italy for the SA Air Force to replace the aging Alouette III helicopters. Program value of R2.169 b (1998 R-value). Contract placed during December 1999. Planned Completion Second Quarter 2008 BACKGROUND Development and production of 30 A109LUH light utility helicopters, from AgustaWestland, Italy for the SA Air Force to replace the aging Alouette III helicopters. Program value of R2.169 b (1998 R-value). Contract placed during December 1999. Planned Completion Second Quarter 2008 BACKGROUND Development and production of 30 A109LUH light utility helicopters, from AgustaWestland, Italy for the SA Air Force to replace the aging Alouette III helicopters. Program value of R2.169 b (1998 R-value). Contract placed during December 1999. Planned Completion Second Quarter 2008 BACKGROUND Development and production of 30 A109LUH light utility helicopters, from AgustaWestland, Italy for the SA Air Force to replace the aging Alouette III helicopters. Program value of R2.169 b (1998 R-value). Contract placed during December 1999. Planned Completion Second Quarter 2008
PROGRAM PROGRAM FINANCIAL FINANCIAL
OBJECTIVES PERFORMANCE OBJECTIVES PERFORMANCE
Complete development of the system Civil Certification by the European Civil Aviation Authority Type Certificate by Military Airworthiness Board Training of pilots and technicians Delivery of first 12 helicopters Deliver initial logistic support package Development completed EASA Certification Issued Military Airworthiness Board accepted baseline and issued Type Certificate 8 Pilots and 20 technicians were trained 7 helicopters delivered and utilised by the SA Air Force The initial support package including documentation, spares and equipment has been delivered Spend at least 92 of R699m Spent 52.4 (R366m) Delivery of some helicopters were delayed to 2nd quarter of 2006 due to technical problems
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PERFORMANCE AGAINST ACQUISITION GOALS
AIR DEFENCE OTHER CARDINAL PROGRAMS 2.7 AIRBUS A400 STRATEGIC HEAVY LIFT AIRCRAFT AIR DEFENCE OTHER CARDINAL PROGRAMS 2.7 AIRBUS A400 STRATEGIC HEAVY LIFT AIRCRAFT AIR DEFENCE OTHER CARDINAL PROGRAMS 2.7 AIRBUS A400 STRATEGIC HEAVY LIFT AIRCRAFT AIR DEFENCE OTHER CARDINAL PROGRAMS 2.7 AIRBUS A400 STRATEGIC HEAVY LIFT AIRCRAFT
BACKGROUND Acquisition of 8 Airbus A400 Strategic Heavy Lift Transport Aircraft from Airbus Military (AMSL) Program value is R11,4 billion (2005 Rand value) Contract was sign on 28 April 2005 Planned Program Completion End 2013 BACKGROUND Acquisition of 8 Airbus A400 Strategic Heavy Lift Transport Aircraft from Airbus Military (AMSL) Program value is R11,4 billion (2005 Rand value) Contract was sign on 28 April 2005 Planned Program Completion End 2013 BACKGROUND Acquisition of 8 Airbus A400 Strategic Heavy Lift Transport Aircraft from Airbus Military (AMSL) Program value is R11,4 billion (2005 Rand value) Contract was sign on 28 April 2005 Planned Program Completion End 2013 BACKGROUND Acquisition of 8 Airbus A400 Strategic Heavy Lift Transport Aircraft from Airbus Military (AMSL) Program value is R11,4 billion (2005 Rand value) Contract was sign on 28 April 2005 Planned Program Completion End 2013
PROGRAM PROGRAM FINANCIAL FINANCIAL
OBJECTIVES PERFORMANCE OBJECTIVES PERFORMANCE
Conclude Agreement for development and supply of the A400M system Conclude management cooperation agreement with OCCAR (organisation acting on behalf of the 7 launch nations) First run of installed engine and propeller Agreement with Airbus signed on 28 April 2005 Management Agreement with OCCAR concluded First engine and propeller run test, installed on a wing, successfully completed Spend at least 92 of the budgeted R656m. Spent 110.1 or R722m of budget Over expenditure due to complete plan not reflected in budget. Additional funds provided by DOD, not reflected in baseline.
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PERFORMANCE AGAINST ACQUISITION GOALS
AIR DEFENCE OTHER CARDINAL PROGRAMS 2.8 ROOIVALK ATTACK HELICOPTER AIR DEFENCE OTHER CARDINAL PROGRAMS 2.8 ROOIVALK ATTACK HELICOPTER AIR DEFENCE OTHER CARDINAL PROGRAMS 2.8 ROOIVALK ATTACK HELICOPTER AIR DEFENCE OTHER CARDINAL PROGRAMS 2.8 ROOIVALK ATTACK HELICOPTER
BACKGROUND Acquisition of 12 Rooivalk Attack Helicopters from Denel Aerospace Systems Planned Program Completion End 2013 BACKGROUND Acquisition of 12 Rooivalk Attack Helicopters from Denel Aerospace Systems Planned Program Completion End 2013 BACKGROUND Acquisition of 12 Rooivalk Attack Helicopters from Denel Aerospace Systems Planned Program Completion End 2013 BACKGROUND Acquisition of 12 Rooivalk Attack Helicopters from Denel Aerospace Systems Planned Program Completion End 2013
PROGRAM PROGRAM FINANCIAL FINANCIAL
OBJECTIVES PERFORMANCE OBJECTIVES PERFORMANCE
Complete all the development elements required to achieve the weapon system performance specification Update the Electronic Warfare system and rectify identified shortfalls Development of weapon system elements completed and testing has commenced Initial Electronic Warfare system completed and successfully tested Spend at least 92 of R264 million budget Spent 73.5 or R194 million Under-spent due to impasse on communication system and repair of the first production model
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PERFORMANCE AGAINST ACQUISITION GOALS
LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.9 NEW GENERATION INFANTRY COMBAT VEHICLE LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.9 NEW GENERATION INFANTRY COMBAT VEHICLE LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.9 NEW GENERATION INFANTRY COMBAT VEHICLE LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.9 NEW GENERATION INFANTRY COMBAT VEHICLE
BACKGROUND Acquisition of a New Generation Infantry Combat Vehicle to replace the ageing Ratel Infantry Vehicle that has been in service since 1976. Single offer received from Denel. The performance parameters of the prototype vehicle were evaluated at Gerotek Vehicle Test Track and Alkantpan Test Range. Ongoing engagement with Denel to clarify the product specification and price of the system. BACKGROUND Acquisition of a New Generation Infantry Combat Vehicle to replace the ageing Ratel Infantry Vehicle that has been in service since 1976. Single offer received from Denel. The performance parameters of the prototype vehicle were evaluated at Gerotek Vehicle Test Track and Alkantpan Test Range. Ongoing engagement with Denel to clarify the product specification and price of the system. BACKGROUND Acquisition of a New Generation Infantry Combat Vehicle to replace the ageing Ratel Infantry Vehicle that has been in service since 1976. Single offer received from Denel. The performance parameters of the prototype vehicle were evaluated at Gerotek Vehicle Test Track and Alkantpan Test Range. Ongoing engagement with Denel to clarify the product specification and price of the system. BACKGROUND Acquisition of a New Generation Infantry Combat Vehicle to replace the ageing Ratel Infantry Vehicle that has been in service since 1976. Single offer received from Denel. The performance parameters of the prototype vehicle were evaluated at Gerotek Vehicle Test Track and Alkantpan Test Range. Ongoing engagement with Denel to clarify the product specification and price of the system.
PROGRAM PROGRAM FINANCIAL FINANCIAL
OBJECTIVES PERFORMANCE OBJECTIVES PERFORMANCE
Submit Project Study Report 2 for DOD approval Clarify offer Project Study Report 2 was submitted and approved Price and technical specification clarification took place and was completed by 31 March 2006. Project Study Report 3 is in process to recommend the way forward 92 of R2.6m Spent 76.9 (R2m) Execution delayed due to evaluation of program affordability
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PERFORMANCE AGAINST ACQUISITION GOALS
LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.10 NEW GENERATION OPERATIONAL SUPPORT VEHICLES LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.10 NEW GENERATION OPERATIONAL SUPPORT VEHICLES LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.10 NEW GENERATION OPERATIONAL SUPPORT VEHICLES LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.10 NEW GENERATION OPERATIONAL SUPPORT VEHICLES
BACKGROUND Acquisition of a series of operational supply vehicles to replace the ageing Samil range of vehicles. Offers received from five contenders. Field testing of as well as offer evaluation has been completed. BACKGROUND Acquisition of a series of operational supply vehicles to replace the ageing Samil range of vehicles. Offers received from five contenders. Field testing of as well as offer evaluation has been completed. BACKGROUND Acquisition of a series of operational supply vehicles to replace the ageing Samil range of vehicles. Offers received from five contenders. Field testing of as well as offer evaluation has been completed. BACKGROUND Acquisition of a series of operational supply vehicles to replace the ageing Samil range of vehicles. Offers received from five contenders. Field testing of as well as offer evaluation has been completed.
PROGRAM PROGRAM FINANCIAL FINANCIAL
OBJECTIVES PERFORMANCE OBJECTIVES PERFORMANCE
Offers had to be evaluated Submission of Project Study Report (PSR). Evaluation of the offers was completed and the PSR was submitted in November 2005 for approval. Program on hold, pending approval of Project Study by DOD Spend at least 92 of R7.6million budget Spent 82.9 or R6.3million No further progress possible, pending DOD approval
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PERFORMANCE AGAINST ACQUISITION GOALS
LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.11 GROUND BASED AIR DEFENCE SYSTEM LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.11 GROUND BASED AIR DEFENCE SYSTEM LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.11 GROUND BASED AIR DEFENCE SYSTEM LANDWARDS DEFENCE OTHER CARDINAL PROGRAMS 2.11 GROUND BASED AIR DEFENCE SYSTEM
BACKGROUND Acquisition of Local Warning Segment of Ground Based Air Defence System from Denel Contract placed during January 2003 with contract value of R801 million Contractual completion date June 2006 Completion delayed. Expected completion date December 2009 BACKGROUND Acquisition of Local Warning Segment of Ground Based Air Defence System from Denel Contract placed during January 2003 with contract value of R801 million Contractual completion date June 2006 Completion delayed. Expected completion date December 2009 BACKGROUND Acquisition of Local Warning Segment of Ground Based Air Defence System from Denel Contract placed during January 2003 with contract value of R801 million Contractual completion date June 2006 Completion delayed. Expected completion date December 2009 BACKGROUND Acquisition of Local Warning Segment of Ground Based Air Defence System from Denel Contract placed during January 2003 with contract value of R801 million Contractual completion date June 2006 Completion delayed. Expected completion date December 2009
PROGRAM PROGRAM FINANCIAL FINANCIAL
OBJECTIVES PERFORMANCE OBJECTIVES PERFORMANCE
Fully factional system to be completed by end March must be ready for evaluation and user training Start of Operational Test evaluation Commence with Sub-system user training Completion of fully functional system delayed by 41 months. Fully functional system training also delayed. Spend at least 92 of R297million budget Spent 17.8 or R53 million Under spent due to non -performance of Denel and other sub- contractors
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PERFORMANCE AGAINST ACQUISITION GOALS
ACQUISITION PERFORMANCE 2.12 OTHER ACTIVITIES ACQUISITION PERFORMANCE 2.12 OTHER ACTIVITIES ACQUISITION PERFORMANCE 2.12 OTHER ACTIVITIES
DESCRIPTION OBJECTIVE PERFORMANCE
Capital Acquisition Programs (other SDA/GDA) Development, Production, Procurement of Product Systems and equipment Primarily acquired from Local Defence Related Industry Spend 92 of Allocated SDA/GDA budget (R2107) Spent 41.4 of allocated SDA/GDA Budget (R835) Under expenditure mainly due to late delivery by Industry and delayed receipt of requirements from DOD
Procurement/Support activities (SDA/GDA) Procurement of spares (Army, SAAF) (R270m) Product Support contracts (Vehicles, Cheetah, Oryx etc (R960m) Procurement of consumables (clothing, ammunition etc.) (R260m) Spend 92 of Allocated SDA/GDA budget (R1490) Spent 92.9 of allocated SDA/GDA Budget (R1384)
Technology Acquisition Air operations technology (R 91m) Maritime operations technology (R 29m) Landward operations technology (R 79m) Other (electronics, support, chemical defence etc) (R100m) Spend 92 of Allocated technology budget (R299) Spent 92.3 of allocated technology Budget (R276)
Acquisition on behalf of other Departments SAPS (Helicopters, Ammunition, Body Armour) (R166m) Dept Correctional Services (Ammunition, body armour) (R2m) Spend 100 of allocated budget (R168) Spent 96.4 of allocated budget(R162) Under expenditure due to late delivery by Industry and late receipt of requirements
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3.0 DEFENCE INDUSTRIAL PARTICIPATION MANAGEMENT

• BACKGROUND
• Armscor is responsible for the management of the
  Governments DIP Policy.
• Defence purchases are used as a leverage to
  oblige foreign sellers of defence materiel or
  services to benefit South Africas
  defence-related industry.
• The objective of DIP is to ensure the advancement
  of South Africas military strategic and
  defence-related industrial imperatives.
• All defence-related purchases with a foreign
  content in excess of USD 2 million are therefore
  subject to a DIP obligation of at least 50 of
  the contract value.

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DEFENCE INDUSTRIAL PARTICIPATION (DIP) MANAGEMENT

• 3.1. DIP Credits approved - Objectives vs
  Performance 2005/06
• Nature of credits awarded on SDP to date
  (cumulative)
• Sales and exports R 6 080 million
• Technology transfer R 2 976 million
• Investments R 227 million
• Total R 9 283 million
• Approximately 5 000 man-years have been
  contracted to the defence related industry to
  date.
• 3.2. Operational budget vs Performance 2005/06

OBJECTIVE PERFORMANCE
R 1,3 billion R1,764 billion
BUDGET PERFORMANCE
R2,9 million R2,6 million
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4. SANDF OPERATIONAL SUPPORT

• 4.1 DISPOSAL OF SANDF SURPLUS STOCK
• BACKGROUND

• Assist the DOD in the identification of stock for
  disposal.
• Manage the disposal warehouses to secure DOD
  assets transferred for disposal.
• Sell excess and obsolete stock as transferred to
  Armscor by the DOD.

MAIN OBJECTIVES PERFORMANCE
Sell 130 Ratels Sell various configuration of Samil vehicles and related spares Sell 18 F1 mirages and spares Sell 11 Impala aircraft and spares Not sold due moratorium placed on all stock sales until July 2005 Put on hold by the NCACC Not sold in 2005/06 - moratorium placed on all sales until July 2005 Sold after moratorium was lifted to Brazil
BUDGET PERFORMANCE
Turnover R159,0 m Net profit R8,7 m Turnover R53,1 m Net loss R7,3 m
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4. SANDF OPERATIONAL SUPPORT

• 4.2 SPECIALISED SHIPPING AND TRANSPORT
• BACKGROUND

• Advise the DOD and local Industry on freight
  forwarding and customs clearance requirements
• Shipping of military sensitive and hazardous
  equipment and commodities
• Assist industry with the management of a customs
  bonded warehouse for tax planning

OBJECTIVES PERFORMANCE
Assist Industry, DOD and SAPS in the clearance and delivery of Strategic Defence Package equipment and other DOD project equipment The movement of SAPS and VIP equipment to foreign countries Successfully cleared and delivered the following 11 Helicopter (LUH) 10 Hawk aircraft 4 Corvettes 1 Submarine 3 Missions successfully completed
BUDGET PERFORMANCE
Turnover R802,7 m Net profit R4,7 m Turnover R527,7 m Net profit R4,8 m
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4. SANDF OPERATIONAL SUPPORT

• 4.3 ARMSCOR DEFENCE ASSET MANAGEMENT CENTRE
  (ADAC)
• BACKGROUND
• Manage and audit DOD assets currently in use by
  industry.
• Configuration management of Armscor
  documentation, plans and drawings on projects on
  behalf of the DOD
• Marking of all ammunition according to military
  specifications.

OBJECTIVES PERFORMANCE
Verify and audit all DOD assets in Industry. Configuration and digitizing of DOD and Armscor documents. Correct marking of all ammunition 100 audit performed on assets valued at R383 m. All configuration and digitizing was done according to requirements. All requirements adhered to.
OBJECTIVE PERFORMANCE
SLA with DOD R8,2 m Actual spending of R8,2 m
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5. MANAGE DOD STRATEGIC FACILITIES
5.1 Background on Research, Development and
Test and Evaluation facilities BACKGROUND

• IMT - A multi-disciplinary defence research
  division specialising in, testing and evaluation
  of maritime systems.
• Protechnik - A chemical and biological research
  and development division specialising in defence
  and non-proliferation of chemical weapons.
• Hazmat Protective Systems - A manufacturer of
  carbon impregnated products like of canisters and
  masks.
• Ergonomics Technologies - A division providing
  ergonomics and occupational health services to
  the SANDF.
• Defence Institute - A division assisting the
  SANDF in developing insightful solutions to
  problems over the full life cycle of defence
  capabilities.
• Flamengro - The fluid and mechanical engineering
  specialists division that study the dynamic
  behaviour of fluid flow and structures and the
  processing of data to serve as inputs for
  improved simulations .
• Armour Development - Specialists division that
  provide armour protection solutions to the South
  African Armaments industry
• Gerotek Test Facilities A division rendering an
  independent and objective consultation, training,
  test and evaluation service to the South African
  Armaments industry and automotive industry
  locally and abroad.
• Alkantpan Test Range - Is an all purpose
  ballistic test range with a comprehensive
  instrumentation and professional support
  capability.

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5. MANAGE DOD STRATEGIC FACILITIES
OBJECTIVES PERFORMANCE
Operations to geared toward break-even. Net loss of R2,7 m. IMT Under funded by DOD Alkantpan Under funded by DOD Protechnik Under funded by DOD
BEE spending target of R163,9 million which is 25 of total cost of sales and operating expenses of R656,6 million. BEE spending achieved was R250,0 million which is 38,13 higher than the target.
No significant cash management deficiencies on internal and external audit report. No significant cash management deficiencies were reported.
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5. MANAGE DOD STRATEGIC FACILITIES
Objective Performance
Perform study on strategic facilities. Study was completed. The Board made its final recommendations to the Minister of Defence - 31 March 2006.
Identify non sustainable facilities. Facilities identified Alkantpan Gerotek Test Facilities Institute for Maritime Technology Developed break-even strategies DOD funds received - R16m
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6.0 HUMAN RESOURCES

• PERSONNEL VETTING
• TRANSFORMATION

September 2006
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6.1 PERSONNEL VETTING

• BACKGROUND
• Armscor takes responsibility for the protection
  of its clients security classified defence
  information and all materiel that result in the
  protection of the national interests of the RSA
  and its allies.
• To maintain that condition of security, Armscor
  ensures that all its personnel have security
  clearances.
• The SANDF Defence Intelligence (DI) has the
  mandate to conduct security clearance
  investigations and issue clearances for defence
  personnel.
• As a result of its inability to cope with the
  demand for clearances, the SANDF-DI gave Armscor
  the mandate to conduct security investigations
  for Armscor personnel and personnel of the
  Defence-Related Industry (DRI) who are involved
  in Defence projects. The SANDF - DI retains the
  right to issue, refuse or limit clearances.
• Armscor does the initial investigations and then
  forwards the completed fieldwork to DI for issue
  or refusal.

September 2006
31
6.1 PERSONNEL VETTING (CONT.)
OBJECTIVE PERFORMANCE
Maintain the number of valid security clearances for Armscor employees at no less than 90 of the Armscor staff complement. The percentage of Armscor staff with clearances at the end of the FY 2005/06 was 87.8.
Although 87.8 was achieved, a further 5.7,
which Armscor had completed work on, was in
process at the SANDF-DI.
September 2006
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6.2 TRANSFORMATION

• EMPLOYMENT EQUITY
• - Black Appointments
• - Staff Profile Changes March 2005 vs
  March 2006.
• - Staff profile changes by broad band
• - Trend in race and gender representation
  
• March 1996 - March 2006.
• TRANSFORMATION CHALLENGES
• RISKS

September 2006
33
APPOINTMENTS 2005/2006
Staff Category Target Appointments
Black 80 37 (95)
White females N/A -
White Males N/A 2 (5)
Total N/A 39
September 2006
34
STAFF PROFILE MOVEMENT SUMMARY BY BROADBAND
MARCH 2005 MARCH 2006
Blacks Women Blacks Women
EX 55.6 22.2 62.5 12.5
SU 16.4 6.6 17.9 8.9
MP STS 18.8 30.3 20.4 29.5
AS OS 74.7 55.3 76.6 56.9
OVERALL 36.3 36.5 38.2 36.8
EX Executive SU Strategic Execution/Unique
Authority MPManaging/Professional
Contribution STSSupervision/Technical/Specialist
Contribution ASAdvanced Operation/Support
OSOperation/Support Every effort is being
made to fill the vacancy of the General Manager
Board Secretariat Legal Services with a woman.
September 2006
35
PERMANENT EMPLOYEES BY RACE
September 2006
36
PERMANENT EMPLOYEE TOTAL PER GENDER
September 2006
37
TRANSFORMATION CHALLENGES

• The most cited reason for resignation which the
  company could partly manage
• is salary.
• The second (by far) most cited reason for
  resignation is limited growth career
• opportunities. This is largely due to
  the broad band system which offers
• limited opportunities for movement between
  broad bands.
• The relatively low labour turnover limits the
  opportunities to appoint people
• from designated groups.
• Cannot afford an exit strategy for employees
  from the non-designated
• group. This is also not a preferred
  approach because it could lead to loss of
• capabilities.
• Shortage of people from designated groups,
  especially women in the
• market, for the specialised technical
  capability functional areas, the core of
• Armscors work.

September 2006
38
RISKS DUE TO INSUFFICIENT FUNDING OF ARMSCOR

• Execution of Armscors responsibilities relating
  to the acquisition function to the extent and
  depth as dictated by the DOD Acquisition Policy
  is being increasingly hampered by lack of
  capacity and specialist capabilities in a number
  of critical areas.
• Technical expertise has been lost in several
  critical areas
• Insufficient capacity to execute current large
  acquisition programmes has resulted in severe
  risks regarding
• Proper technical management of acquisition
  programs to be executed in order to ensure
  technical integrity of such programs.
• Negotiation of contracts to the best advantage of
  the State.
• Meeting its responsibilities in terms of the
  Service Level Agreement with the DOD.
• Properly defining and managing programs to best
  meet stated users requirements.

September 2006
39
RISKS DUE TO INSUFFICIENT FUNDING OF ARMSCOR

• Severe lack of capacity to perform systems and
  logistics engineering tasks on all programs, is
  resulting in increased reliance on contracted in
  personnel with the following effect
• - Loss of continuity
• - Increased burden on program budgets
• Inability to appoint new trainee Program Managers
  contributes towards the inability to meet
  transformation objectives
• Absence of or limited rejuvenation of ageing
  workforce will exacerbate the capacity problem in
  the near future
• High Risk of brain-drain due to non-military
  capital projects that demand technical management
  skills (e.g. Gautrain, 2010 Soccer Cup related
  infrastructure projects)

September 2006
40
RISKS DUE TO INSUFFICIENT FUNDING OF ARMSCOR

• Risk Abatement Strategy
• Ten additional technical posts approved for
  2006/07.
• Increased transfer payment requested from DOD to
  facilitate appointment of additional personnel.
• The Talent Development Programme was established
  to employ and
• train newly graduated engineers,
  scientist technicians.
• The IMT Cadet Scheme and the Talent Development
  Programme concentrate on newly graduates and
  inexperienced individuals. Since the inception of
  this programme in 1997, 45 candidates were
  appointed to this scheme. After completion of the
  programme, 43 of these trainees were appointed
  into permanent positions within the
• organisation.

September 2006
41
RISKS DUE TO INSUFFICIENT FUNDING OF ARMSCOR

• Armscor Bursary Scheme
• Armscor adopts an integrated approach to
  managing new talent, utilising tools such as the
  bursary scheme, manpower planning and the Talent
  Development Programme. Based on future capability
  needs the number of bursaries per study field
  qualification are identified and allocated.
• Upon graduation these candidates are
  appointed to the Talent Development Programme and
  assigned to departments where they receive
  structured on-the-job training.
• The current bursar composition is as
  follows
• 1 White male, 1 Coloured female, 3 African males
  1 Indian male.
• The intention is that these candidates
  will be appointed on the Talent Development
  Programme after completion of their studies.

September 2006
42
7.1 DEFENCE INDUSTRY SUPPORT
INTERNATIONAL EXHIBITIONS AND EVENTS
BACKGROUND

• Cost effective vehicle to promote South African
  Defence-Related Industries (SADRI) products
  thereby increasing exports.
• Co-ordination role to avoid a fragmented SADRI
  participation.
• Facilitated R4,7m funding from DTI on behalf of
  SADRI.

Performance for 2005/06
Show No. of Companies participating
DSEi 2005 (UK) 13-16 Sept. 05 18
Milipol Paris 2005 (France) 22-25 Nov. 05 4
DEFEXPO 2006 (India) 31 Jan. 3 Feb. 06 10
43
7.2 DEFENCE INDUSTRY SUPPORT
BLACK ECONOMIC EMPOWERMENT (BEE)
BACKGROUND

• Increase BEE participation in SDA, GDA and
  operating budgets
• Implement BBBEE in Defence Procurement.
• Encourage and facilitate joint ventures with BEEs.

OBJECTIVES PERFORMANCE
Revise Policy in line with the BBBEE Policy approved in Nov.05
Establish Practice for practical Implementation of the policy Practice approved in Apr. 06 implemented on 1 Jun. 06
Train core personnel on BBBEE Implementation 80 of core Acquisition personnel trained
BUDGET TARGET PERFORMANCE
SDA GDA 14 of R1.3 billion R182 m 22,21 R288 m
Operating Budget 45 of R33.5 m R15.1 m 46,73 R15.6 m
44
7.2 DEFENCE INDUSTRY SUPPORT (cont.)
EXPORT SUPPORT
BACKGROUND

• SADRI demand driven function.
• Develop and implement export support services in
  partnership with the DOD AMD.
• Facilitate requests from the South African
  Defence-Related Industry (SADRI) for use loan
  of equipment, materiel, facilities secondment
  of SANDF personnel to SADRI.

45
7.2 DEFENCE INDUSTRY SUPPORT (cont.)
OBJECTIVES PERFORMANCE
Co-ordination of Technology and Industry Seminars RSA/French Seminar (May 05) RSA/Russia Seminar (Nov. 05) RSA/Belgium (Mar. 06)
Participation at Government-to-Government Forums RSA/Mali (Apr. 05) RSA/Germany (Apr. 05) RSA/Nigeria (Nov. 05) RSA/Italy (Jan. 06) RSA/Algeria (Mar. 06)
Receive requests for Quotations for military hardware 25 requests received from the following countries referred to SADRI Angola, Australia, Botswana, Chile, Cote DIvoire, Egypt, France, Greece, India, Kenya, Malawi, Namibia, Nigeria, Pakistan, Rwanda, Senegal, Uruguay, USA, Zambia and Zimbabwe
46
7.2 DEFENCE INDUSTRY SUPPORT (cont.)
OBJECTIVES PERFORMANCE
Facilitation of Company-to-Company Co-operation Tinex (Norwegian) with SADRI (Feb. 06) Belgium Flanders Group (Mar. 06)
Assistance to Local and International Defence community Training at SANDF Military Attaché Conference (July and Oct. 05) Cote DIvoire (Forensic investigation)
Co-ordination of visits of International delegations to SADRI Italy (Jan. 06) Turkish Under Def. Sec. (Feb. 06) Algeria (Feb. 06)
REQUESTS FROM SADRI INVOICES ISSUED TRANSFERRED TO DOD
92 Requests R6,1 m R7 m
47
THE ARMSCOR ANNUAL REPORT 2005/06

• THANK YOU