Issues eminating from armscor s annual report for the 2005 2006 financial year
This presentation is the property of its rightful owner.
Sponsored Links
1 / 76

ISSUES EMINATING FROM ARMSCOR’S ANNUAL REPORT FOR THE 2005 / 2006 FINANCIAL YEAR PowerPoint PPT Presentation


  • 75 Views
  • Uploaded on
  • Presentation posted in: General

ISSUES EMINATING FROM ARMSCOR’S ANNUAL REPORT FOR THE 2005 / 2006 FINANCIAL YEAR. Presented to the Portfolio Committee on Defence 13 MARCH 2007.

Download Presentation

ISSUES EMINATING FROM ARMSCOR’S ANNUAL REPORT FOR THE 2005 / 2006 FINANCIAL YEAR

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Issues eminating from armscor s annual report for the 2005 2006 financial year

ISSUES EMINATING FROMARMSCOR’S ANNUAL REPORTFOR THE 2005 / 2006 FINANCIAL YEAR

Presented to the

Portfolio Committee on Defence

13 MARCH 2007


Introduction

The Portfolio Committee on Defence, having conducted departmental hearings on the annual report of Armscor on Tuesday, 12 September 2006, prepared a report and the report was adopted by the Committee on Tuesday 24 October 2005.

Contained in the report were specific questions to which Armscor had to prepare information to be submitted to the Portfolio Committee and this presentation serves to address these questions.

The presentation furthermore addresses the paragraph numbers as reflected in the report adopted by the Portfolio Committee.

Introduction


Issues from armscor s 2005 2006 annual report

Armscor Group Operational Budget 2005 / 2006

4Performance against Acquisition goals

SANDF Operational Support

Manage DOD Strategic Facilities

Transformation Challenges

Risk due to insufficient funding for Armscor

Auditor General’s Report

Conclusion and Recommendations

Issues from Armscor’s 2005/2006 Annual Report


3 armscor group operational budget

There is a need for Armscor to build its skills base. Therefore a briefing on reskilling needs to be available in 6 months

The committee needs a report with regard to the replacement of the main frame and technology renewal

The committee needs clarity on why Armscor spend 72% of its budget on salaries

3.Armscor Group Operational Budget


Briefing on reskilling of armscor employees

Briefing on reskilling of Armscor employees

  • Staff categories in Armscor.

  • Critical enabling competencies.

  • Service delivery application / domain area.

  • Concerns / issues.

  • Interventions.


Briefing on reskilling of armscor employees1

Briefing on reskilling of Armscor employees

Staff categories in Armscor

  • Support Staff: Eg. HR, Corporate Affairs, Finance.

  • 2. Non-technical support to the core function: Registry management, Legal, Financial, etc.

  • 3. Technical personnel.

    • Categories 1 & 2 generally easily available on the market. On appointment need orientation on Armscor processes.

    • Category 3 consists of personnel with tertiary qualifications in a technical discipline (engineering, technology, scientist).

    • Category 3 personnel are extremely difficult to find. Scarcity / shortage exacerbated by the fact that other organisations need people with these qualifications.


Briefing on reskilling of armscor employees2

Briefing on reskilling of Armscor employees

Critical enabling competencies

  • Project Management (integration, scope management, time management – scheduling, cost management, HR management, etc.).

  • Technology Management (planning and coordination).

  • Engineering Management (requirement analysis management, system design, implementation & integration, etc.).


Briefing on reskilling of armscor employees3

Briefing on reskilling of Armscor employees

Service delivery application / domain area

  • Competencies applied in the following areas:

  • Broad military.

  • Vehicles (combat, combat support vehicles, artillery systems, etc.)

  • Aircraft (fighter aircraft, helicopters, unmanned aerial vehicles, etc.)

  • Vessels (submarines, mine counter measure vessels, auxiliary support ships, etc.)

  • Electronics (information warfare, cryptography, navigation systems, etc.)

  • Weapons (guided missiles, torpedoes, rockets, bombs, etc.)

  • Diverse (special forces, diving systems, shelters & infrastructure, etc.)

  • Support (general support, reporting & communication, etc.)


Briefing on reskilling of armscor employees4

Briefing on reskilling of Armscor employees

Concerns / Issues

  • The issues identified regarding employees in the core function include:

  • People with the right qualifications not readily available in the market.

  • People with the right qualifications even when they have the technical experience still need military specific domain knowledge which can only be gained by on-the-job training and experience.

  • Transformation challenges: people from designated groups (DGs, ie. Black people, women and people with disabilities) even more in short supply, the market pays a premium for them and they tend to be more mobile.

  • More experienced employees (possible mentors/coaches) form the actual execution core and are therefore generally loaded which puts a strain on the coaching focus.

  • Aging workforce (average age = 45) and associated retirements.

  • Ongoing general war / competition in the market for the same small pool of competencies.


Briefing on reskilling of armscor employees5

Briefing on reskilling of Armscor employees

Interventions

  • These problems are addressed through the following measures:

  • Addressing pay as much as is affordable.

  • Bursaries and trainee programme.

  • Investment in coaching skills and coaching.

  • Recognition for people who fulfil the coaching role.

  • Succession planning (creating pools of suitably qualified personnel through on-the-job training).

  • Financial support for staff who want to embark on further studies.

  • Ongoing profiling of staff in terms of pending retirements, termination trends, work loading and making provision for continuity.

  • Investment in developing specific learnerships.

  • Investing in an e-learning infrastructure to enable employees to learn on their own with less support than would otherwise be required.

  • Always striving for more financial investment on trainees.

  • Employing younger people and in line with the transformation goals.

  • Sending people on training courses.


Replacement of the main frame and technology renewal

Initiative / Strategy:

Transform current application systems to be more cost effective and include additional functionalities as defined in the User Requirement Statement

Commencement date:

1 April 2005

Objectives:

Technology renewal

Cost reduction

Replacement of the main frame and technology renewal

Replacement of the main frame


Replacement of the main frame and technology renewal1

The Mainframe running costs are high in comparison with client server platforms.

The database systems, programming languages are outdated

Outdated development language such as Cobol and database management systems such as IDMS are rarely supported, as skills are dwindling and expensive. Moreover, training institutions are no longer providing training for these technologies because they are outdated.

Shrinking Defence Budget.

Cyborg is no longer supported with effect from 1 Apr 2007.

The application system that is being used by Human Resources Department to maintain employees biographical and leave data. The system was originally bought from Cyborg Systems Africa. This company was taken over by Hewitt Associates however who rendered all support services for the system. Armscor was notified in October 2005 that Hewitt Associates were going to cease all their African Cyborg support operations at the end of April 2007.

Replacement of the main frame and technology renewal

Replacement of the main frame


Replacement of the main frame and technology renewal2

Replacement of the main frame and technology renewal

Replacement of the main frame


Replacement of the main frame and technology renewal3

Replacement of the main frame and technology renewal

Capital renewal

  • ICT Equipment needs to be replaced on regular cycles as indicated in

  • the following table


Replacement of the main frame and technology renewal4

Replacement of the main frame and technology renewal

Capital renewal

Initial problem statement:

IT Capital Budget never enough to cater for all the requirements

ARMSCOR is not getting enough funds due to the budget cuts of the DOD. This has resulted in budget cuts for the IT department, making it difficult to renew the infrastructure and applications.

The total cost of ownership of the current ICT infrastructure and services is approximately R60m and the funding that ICT receives is on average R50m indicating an under funding gap of R10m annually. This is evident in the deteriorating infrastructure and the poor response times being experienced by the users on a daily basis.

In addition, the maintenance, support and maintenance costs of the infrastructure are very high such that no funds are available to develop new systems or renew the infrastructure.


Replacement of the main frame and technology renewal5

Replacement of the main frame and technology renewal

Capital renewal

  • Objectives:

  • Provide for the renewal of IT equipment every 3 to 5 years depending on business requirements

  • To properly plan the purchase of IT equipment so as to minimise disruption of service due to equipment failure

  • To evenly spread, without the usual peak in budget requirements, spending on replacement


Replacement of the main frame and technology renewal6

Replacement of the main frame and technology renewal

Capital renewal

How the situation has improved:

  • Areas for potential cost reduction have been identified and the potential savings have been quantified as a result of the Enterprise Architecture Project

  • Guidelines in place for managers to allocate the right device to the right person based on the requirements of the job

  • A project is underway to consolidate the servers at the Head Office in order to reduce maintenance, license and support costs.


Replacement of the main frame and technology renewal7

Replacement of the main frame and technology renewal

Capital renewal

What still needs to be done:

  • Complete the server consolidation 31/03/07

  • Deploy initial Thin Client devices31/08/07

  • Complete printer consolidation project30/09/07

  • Replacement of computers and notebooksannually

  • Replacement of network componentsannually


Why armscor spend 72 of its budget on salaries

Why Armscor spend 72% of its budget on salaries

  • Operational budget for 2005/06.

  • Operational investment/requirements of Armscor.

  • Skill profile of Armscor.

  • Organisational structure.


Why armscor spend 72 of its budget on salaries1

Why Armscor spend 72% of its budget on salaries

Operational budget for 2005/06


Why armscor spend 72 of its budget on salaries2

Why Armscor spend 72% of its budget on salaries

Operational investment / requirements of Armscor

  • Armscor is a service organisation whose operational investment (as reflected in the distribution of its operational costs) is in the competencies of its personnel. This is unlike for example, a manufacturing organisation which has to create a product and which would need machines, raw materials and even a warehousing and distribution infrastructure, which would add to its costs.

  • Furthermore, the technically complex nature of Armscor’s operational environment demands high level personnel in the technical functional disciplines which leads to a staff profile as indicated on the following slides.


Why armscor spend 72 of its budget on salaries3

Why Armscor spend 72% of its budget on salaries

Occupational Levels


Why armscor spend 72 of its budget on salaries4

Why Armscor spend 72% of its budget on salaries

Staff / skill profile


Why armscor spend 72 of its budget on salaries5

8

56

379

229

207

82

Why Armscor spend 72% of its budget on salaries

  • Unlike a typical organisation whose staff distribution profile is triangle shaped, Armscor is more diamond shaped.

  • Furthermore, in order to fulfil its mandate, the organisation employs people with skills which fall in the higher paying functional groups

  • (ie.: Technicians, scientists and engineers) which raise the payroll.


4 performance against acquisition goals

4.1Maritime Defence: Strategic Defence Packages

The committee wish to congratulate Armscor for the deliverance of the 4 Corvettes to the South African Navy, although the submarine programme is complete the committee need clarity on the issues of the 3 month delay

4.2Air Defence: Strategic Defence Packages

Only seven of the twelve light utility helicopters were delivered due to technical problems. The Committee needs a report on what are the technical problems that occurred and has this been corrected

The budget for the Airbus has been overspend due to the complete plan not being reflected in the budget, what caused this to happen, and also the additional funds supplied by DOD was not reflected in the baseline that the Committee requested

4.3Landward Defence: Strategic Defence Packages

The Committee needs a report on the delay due to the affordability program of the new generation light infantry vehicles and whether has the studies been completed

The Committee needs clarity with regard to the 41 months in the completion of the ground based air defence system due to non-performance by Denel and other sub-contractors

4.Performance against Acquisition goals


4 1 maritime defence strategic defence packages

4.1Maritime Defence: Strategic Defence Packages

Three month delay in submarine programme

  • The submarine program is running three months behind schedule due to the Contractor working to an over-optimistic schedule associated with the harbour acceptance trials of the submarines as well as some unexpected technical problems encountered during these trials.

  • Cognisance should however be taken of the fact that the acquisition programme stretches over a total period of eight years which commenced during 2000, and a delay of three months over this period is considered to be negligible.


4 2 air defence strategic defence packages

The delivery of the first A109LUH was delayed due to the fact that the process of confirming the qualification results and compliance to specifications took longer than initially planned for.

Due to the time lost to confirm qualification prior to acceptance of the first helicopter, it was not possible to deliver the initially planned number of 12 helicopters within the report period.

4.2Air Defence: Strategic Defence Packages

Technical problems encountered with the light utility helicopter programme


4 2 air defence strategic defence packages1

Armscor had the approval (financial authority) to spend the funds.

The A400 programme has a special arrangement regarding funding within the DOD.

4.2Air Defence: Strategic Defence Packages

Airbus budget and baseline


4 3 landward defence strategic defence packages

New Generation Infantry Combat Vehicle Product System:

Project HOEFYSTER provides a complete level 5 New Generation Infantry Combat Vehicle Products System (NGICV-PS) to replace the Ratel Infantry Combat Vehicle that has been in service since 1976.

The offer as submitted on 24 February 2005 by Denel as main contractor, as well as a NGICV SV prototype vehicle was evaluated by Armscor and DAPD.

The technical performance of the vehicle offered was mostly on par with the requirements, except for a few minor deviations that could be overcome with some minor design changes or adjustment in the specifications.

The unit production cost and total project cost was not acceptable. The IPT was mandated to obtain the “best offer” from Denel, and present that for consideration to the Armaments Acquisition Steering Board in Project Study Report 3.

4.3Landward Defence: Strategic Defence Packages

Delay due to affordability program of the new generation light infantry vehicle


4 3 landward defence strategic defence packages1

4.3Landward Defence: Strategic Defence Packages

Delay due to affordability program of the new generation light infantry vehicle

NGICV – PS: Background:

  • Denel submitted a reviewed offer on 18 November 2005 to Armscor. The unit production prices of the combat variants as well as the total project cost was still not acceptable.

  • During December 2005 Armscor requested Denel to present their “best and final offer” by February 2006. Denel submitted a revised offer (Issue C) on 03 February 2006. The prices offered for the turrets were considered acceptable, but the prices for the vehicle platforms were still unacceptable. Denel, together with Patria and Land Systems OMC, again revised the offer and a more acceptable price was offered on 03 March 2006.

  • The Project Control Board advised the Integrated Project Team to enter into detail contract negotiations with Denel based on the revised offer received. The offer clarification process then started with Denel.


4 3 landward defence strategic defence packages2

4.3Landward Defence: Strategic Defence Packages

Delay due to affordability program of the new generation light infantry vehicle

NGICV -Current Status:

  • Negotiations with Denel with the aim of arriving at a contracting position commenced on 8 November 2006.

  • Negotiations with the aim of contracting for a phased acquisition program has progressed very well, although a number of detail issues still need to be resolved before a contracting position can be achieved.

  • Technically both teams have negotiated for an excellent product.

  • The outstanding issues to be resolved before a contract can be established, are presently being addressed at a high level between Armscor/DOD and Denel.


4 3 landward defence strategic defence packages3

Contract was placed on Denel during November 2002.

Value R801 122 885,00

Activation Date – February 2003

Programme period – 36 months

Delay of 5 months in activation due to problem with guarantee for advance payment.

Extend contract period to 41 months – 30 June 2006

May 2005 – 9 month late delivery notification from Denel

August 2006 – further 45 month late delivery notification from Denel

Total projected slip on program of 54 months – expected delivery date of 30 November 2009

Penalties contractually payable – 10% of contract value (R80.1 million)

4.3Landward Defence: Strategic Defence Packages

41 Month delay in ground based air defence system - Background


4 3 landward defence strategic defence packages4

4.3Landward Defence: Strategic Defence Packages

41 Month delay in ground based air defence system – Denel non-performance

Delay in programme activation mainly attributed to the following:

  • Extensive delay in contracting of subcontractors – mostly local

  • Subcontracting of some work elements still outstanding

  • Delay of more than 1 year in translating Armscor System Specification into subsystem specifications

    • Specifications on subcontracted elements not finalized

  • Design shortcomings identified in certain subsystem elements and are now being redesigned

    • Thermal Imager

    • Power supply for Radar

    • Radio Interface Module

  • Logistics development is lagging due to non finalization of subsystem designs

  • Large personnel turnover causing loss of continuity


4 3 landward defence strategic defence packages5

4.3Landward Defence: Strategic Defence Packages

41 Month delay in ground based air defence system – Risk mitigation

  • All foreseeable risks have been identified and detailed risk mitigation plans have been developed per risk.

  • Factory acceptance now performed by Armscor per subsystem element as they are completed

  • Early user exposure to subsystems implemented

    • First missile firing by users planned for October 2007

  • User training on subsystem level implemented instead of first training once entire product system is completed


5 sandf operational support

5.1Disposal of SANDF surplus stock

Armscor shows a net loss of R7.3m due to moratorium put on stock sales by the NCACC, this is of great concern to the Committee and we need to know what preventative measures are being put in place to prevent this from re-occurring

5.SANDF Operational Support


5 sandf operational support1

5.SANDF Operational Support

Preventative measures to combat re-occurrence of moratorium

  • A forum has been established between the Secretary for Defence and the CEO of Armscor to discuss on a regular basis all stock sales issues.

  • A forum that includes the Chief of Acquisition, the Chief of Logistics and the General Manager: Armscor Business was created to screen all applications before submitting the requests to the NCACC.


6 manage dod strategic facilities

The Committee is concerned about the R2.7m net loss on the IMT, Alkantpan and Protechnik under funding and therefore the Committee needs a presentation on what measures are being put in place to prevent this from re-occurring

6.Manage DOD strategic facilities


6 manage dod strategic facilities1

Various presentations stating the strategic nature of IMT, Alkantpan and Gerotek were made during 2005 which resulted in the DOD providing additional funding of R16m per year as from 2006/07

IMT R3m

Gerotek R3m

Alkantpan R10m

Break-even strategies were developed and implementation started 01/04/2006

No additional funding could be obtained from the DOD for Protechnik. A Break-even strategy was developed and implementation started in 2007.

6.Manage DOD strategic facilities

Measures to combat re-occurrence of under funding of strategic facilities


7 transformation challenges

The Committee needs a presentation with regard to preventative measures being put in place to stop the loss of personnel due to salaries and limited growth career opportunities.

The Committee needs a presentation by April 2007 on the transformation and Equity policy with the emphasis on Affirmative Action, Gender and Race in managerial positions

7.Transformation Challenges


7 transformation challenges1

7.Transformation Challenges

Measures to stop the loss of personnel due to salaries and limited growth career opportunities

Salaries

The problem arose mainly due to the fact that during the years 1992 – 2002 Armscor paid below market average general annual remunerations increments. As a result the company was found, by 2001, to be paying on average, on the 25th percentile of the market.

  • From 2003 to 2005 Armscor granted above market-average general annual remuneration increments.

  • In 2004 the position of each employee in relation to the market for the applicable functional group (occupational category) was factored into the exercise to ensure that employees are as aligned as affordable to their occupational categories in the market.


7 transformation challenges2

7.Transformation Challenges

Measures to stop the loss of personnel due to salaries and limited growth career opportunities

  • 2006 : focus specifically on employees that possess scarce skills which are being utilised in vulnerable capability domains - additional 2% based on scarcity as measured by performance, competence and market position comparability.

  • Remuneration model to cater for the implementation of interim salary reviews and promotion related salary increments.

  • Model based on competence, performance and pay level in relation to the market.


7 transformation challenges3

7.Transformation Challenges

Measures to stop the loss of personnel due to salaries and limited growth career opportunities

  • Limited career growth opportunities

  • Broad Banding in order to promote a more flexible utilisation of employees. => Only six jobs levels. (Still the preferred organisational design by management.)

  • However the system does recognise the movement and associated remuneration alignment within the broadbands. Notwithstanding the within-broad band movement, some employees still find the limited movement between broad bands a cause of grief.


7 transformation challenges4

7.Transformation Challenges

Measures to stop the loss of personnel due to salaries and limited growth career opportunities

  • Other factors which may limit career growth, such as under-utilisation of staff are monitored. For instance new employees are subjected to a post-appointment follow up interview which may help identify this problem in time.

  • Relatively low average turnover rate at less than 6% limits opportunities to create space. (However, due to market factors this may be higher in some categories -typically those where it should be lowest.)

  • Remuneration measures spelt out above try to mitigate this.)


7 transformation challenges5

7.Transformation Challenges

Transformation and Equity Policy

  • Consultative Forum

  • Manpower planning:  Demographic profile of the country and the regions.

  • Numerical goals:  Appointment of blacks and women, representation of blacks, women and people with disabilities.

  • Diversity sensitization.

  • Accommodation of people with disabilities.  Audits.

  • Some specific measures:  Post-appointment interviews, motivation of requirements beyond the Honours degree.

  • Bursary scheme, TDP.

  • Remuneration disparities. 

  • Training, coaching, composition of project teams.

  • Manager responsible for AA.


7 transformation challenges6

7.Transformation Challenges

Transformation and Equity Policy

The progress that has been made over the years in the broad band STS (≈Skilled technical and academically qualified workers, junior management, supervisors, foremen, superintendents) is indicated in the following two slides.


7 transformation challenges7

7.Transformation Challenges

Transformation and Equity Policy: Employee statistics for STS +

03/2000 01/2006

21.8%

Female

27.7

Female

78.2%

Male

72.3%

Male


7 transformation challenges8

7.Transformation Challenges

Transformation and Equity Policy: Employee statistics for STS +

03/2000 01/2007

Black

23.4

Black

7.7

White

92.3

White

76.6


8 risks due to insufficient funding

Armscor reported on its inability to appoint a new trainee programme but if you look at the goals set by Armscor part of the things that needs to be addressed is that of the trainee program, the Committee therefore recommends that more funds should be allocated towards this programme

The Committee needs a presentation on the workings of the Armscor bursary scheme, what are the criteria required to qualify for this, what happens after completion of studies, what is the passing rate and what are being done to retain these skills?

8.Risks due to insufficient funding


8 risks due to insufficient funding1

8.Risks due to insufficient funding

Armscor’s trainee programme budget

  • Armscor recognises that the trainee programme – Talent Development Programme (TDP) forms the bedrock of its renewal and transformation.

  • As a result would like to invest more financially in this initiative.

  • Additional financial investment is unfortunately constrained by other critical competing demands on the organisation’s financial resources.


8 risks due to insufficient funding2

8.Risks due to insufficient funding

Armscor’s bursary scheme

  • The criteria are a combination of the following:

  • Proposed field of study (typically technical, engineering and natural sciences, as well as selected fields such as computer science and commercial science).

  • Academic merit.

  • The parents’ ability to support the studies.


8 risks due to insufficient funding3

8.Risks due to insufficient funding

Armscor’s bursary scheme

Entrance requirements

  • In order to be eligible to participate, applicants must-

  • Have completed Grade 12 with University exemption.

  • Be in or have already written and passed their first year

  • Have expressed interest in a career within the defence industry

  • Be willing to become employed in Armscor.

  • Be able to obtain and retain the required positive security clearance.

  • Have relevant subjects to enable them to be employed in Armscor.


8 risks due to insufficient funding4

8.Risks due to insufficient funding

Armscor’s bursary scheme

  • What happens after completion of studies?

  • The bursars are appointed into the TDP.

  • Historically some were lost.

  • Have now adopted a system of linking the provision of bursaries and the appointment of trainees to long-term staff plans.

  • Adjusted the pay levels.


8 risks due to insufficient funding5

8.Risks due to insufficient funding

Armscor’s bursary scheme

  • Passing rate:

  • 19 Appointed since 1999.

  • 4 Dropped out.

  • 5 Completed studies, were appointed as TDPs then resigned.

  • 3 Completed studies, got trained and currently employed.

  • 3 Completed studies, currently completing vacation work requirements, to be appointed into the TDP.

  • 3 To complete studies in 2007.

  • 1 To complete in 2008.


9 auditor general s report

The Auditor General report states that the following policies and procedures were not formally approved during the year under review therefore the Committee needs a report on these issues:

9.Auditor General’s Report

  • A formal information systems change control policy

  • Data backup and related disaster recovery policy

  • Logical Access and security policy to control access to the information system


9 auditor general s report1

The IT policy was reviewed and revised in October / November 2006 to ensure that it addresses the change management questions posed. It was subsequently approved by the Board of Directors in their first meeting of 2007.

9.Auditor General’s Report

Information systems control policy

Data backup and related disaster recovery policy

The IT policy as approved addresses the question of disaster recovery. In addition, detailed Backup and Restore guidelines have been approved by the management of Armscor.


9 auditor general s report2

Legacy Mainframe Systems – It is not economically feasible to rewrite the legacy mainframe systems to comply with the new logical access and security controls. This requirement is to be addressed as part of the transformation of the application systems of Armscor.

Modern Application Systems – The Information Systems Security Policy has been revised and is going to serve in the April meeting of the Board of Directors.

9.Auditor General’s Report

Logical access and security policy to control access to the information system


10 conclusion and recommendations

There is a need for Armscor to present to the Committee on the following issues:

10.Conclusion and Recommendations

  • R51m saving with regard to Information Technology, Operational Items and Vacancies the Committee feels that this was an under spending.

  • A small saving of R12m which could not be explained.

  • A report on the outcome of the suspension of the CEO and how R126m and the R21m respectively was lost

  • R3.4b unspent money, the Committee needs this unpacked


10 conclusion and recommendations1

10.Conclusion and Recommendations

Under spending of R51m


10 conclusion and recommendations2

10.Conclusion and Recommendations

Under spending of R51m


10 conclusion and recommendations3

10.Conclusion and Recommendations

Small saving of R12m


10 conclusion and recommendations4

10.Conclusion and Recommendations

Report on the outcome of the suspension of the CEO and others

On the 24th February 2005 the Armscor Board of Directors suspended the Chief Executive Officer, Mr Thomo, the General Manager Armscor Business, Dr Jan de Necker and Executive Manager DMD, Mr Boet van Staden, following allegations levelled against them with regards to the marketing of the Ratel to Jordan.

The allegations related to the failure to return the Ratel back to the Department of Defence after the expiry of the temporary export permit. The Board considered the allegations serious enough to warrant an immediate suspension of the three officials pending a full investigation.

The Board engaged the services of the Gobodo Forensic and Investigative Accounting (Pty) Ltd to undertake an investigation of the allegations against the three.

Gobodo Forensic Accounting presented its final report to the Board at a special sitting of the Board on 9 June 2005.


10 conclusion and recommendations5

10.Conclusion and Recommendations

Report on the outcome of the suspension of the CEO and others

The investigation revealed no evidence of wrong doing or negligence to substantiate the allegations against the three Armscor officials, consequently, the main findings and recommendations of Gobodo were as follows:

  • i)The Chief Executive Officer, Mr Sipho Thomo should be absolved of any irregularity in this entire matter and his suspension should be lifted with immediate effect;

  • The suspension of the General Manager: Armscor Business, Dr Jan de Necker, should be lifted with immediate effect.

  • iii)The suspension of the Executive Manager: Defence Matériel Disposal, Mr Boet van Staden, should be lifted with immediate effect.

After deliberating on these issues, the Board of Directors accepted the above findings and recommendations.


10 conclusion and recommendations6

10.Conclusion and Recommendations

Report on the outcome of the suspension of the CEO and others

The three Armscor officials were reinstated on 10 June 2005 and resumed their duties on Monday, 13 June 2005.

This matter was reported publicly in the Armscor’s Annual Report, and as such has been fully and satisfactorily concluded.


10 conclusion and recommendations7

10.Conclusion and Recommendations

Report on the loss of R126m and R21m respectively


10 conclusion and recommendations8

10.Conclusion and Recommendations

Unpacking of R3.4b unspent money


10 conclusion and recommendations9

10.Conclusion and Recommendations

Unpacking of R3.4b unspent money


Issues eminating from armscor s annual report for the 2005 2006 financial year

Thank you


5 sandf operational support2

5.1Disposal of SANDF surplus stock

Armscor shows a net loss of R7.3m due to moratorium put on stock sales by the NCACC, this is of great concern to the Committee and we need to know what preventative measures are being put in place to prevent this from re-occurring

5.SANDF Operational Support


5 sandf operational support3

Background

During 2001 and 2002 the Auditor General and SCOPA raised serious concerns regarding the redundant assets that have not been disposed of

A business plan was drawn up and on 26 September 2002, the Plenary Defence Staff Council approved the implementation of this plan for the disposal of excessive category 1 materiel

Armscor Business will work on risk and will receive no transfer payment to cover the costs of this function.

Instead of receiving a transfer payment from the DOD, Armscor Business is allowed to retain 20% of the sales value of stock and the balance will be paid into the account of the DOD.

The 20% retained income consists of 12.5% to recover operational costs incurred and an incentive in the form of a 7.5% commission.

5.SANDF Operational Support

Preventative measures to combat re-occurrence of moratorium


5 sandf operational support4

Function and processes:

The main responsibility of DMD is the management of the warehousing, marketing and sale of disposed redundant and surplus defence materiel of the DOD, as and when the materiel is identified by the DOD.

Such disposal is done to the best possible advantage of the DOD and the State in terms of the Armscor Act as well as the Service Level Agreement between Armscor and the Department of Defence.

The sales process is induced by either a pro-active or reactive action and is executed by means of foreign/local sales, tenders and replacements.

5.SANDF Operational Support

Preventative measures to combat re-occurrence of moratorium


5 sandf operational support5

Restrictions placed on DMD:

On 10 March 2005 DMD received a “for information only” copy of a letter sent by the Deputy Director General of the Chief of Acquisitions and Procurement Department to the office of the Chief of Logistics, in which it is stated that all requests received for the disposal of stores by Armscor be frozen until further notice, as well as that DAPD will not authorise Armscor (DMD) to proceed with any new requests for the sale of disposed materiel

5.SANDF Operational Support

Preventative measures to combat re-occurrence of moratorium


5 sandf operational support6

Cost drivers:

The operational expenses of the Defence Material Disposal Division

The maintenance, security, personnel and the management of the existing eight warehouses;

The cost of rendering assistance to the Arms of Service during phases 1 to 4 of their disposal investigation, which occurs prior to the stock being made available to DMD.

5.SANDF Operational Support

Preventative measures to combat re-occurrence of moratorium

Conclusion:

  • A forum between the Secretary for Defence and the CEO of Armscor discuss on a regular basis all stock sales issues.

  • A forum that includes the Chief of Acquisition, the chief of Logistics and the General Manager: Armscor Business was created to screen all applications before submitting the requests to the NCACC.


10 conclusion and recommendations10

10.Conclusion and Recommendations

Unpacking of R3.4b unspent money


10 conclusion and recommendations11

10.Conclusion and Recommendations

Unpacking of R3.4b unspent money


10 conclusion and recommendations12

10.Conclusion and Recommendations

Unpacking of R3.4b unspent money


10 conclusion and recommendations13

10.Conclusion and Recommendations

Unpacking of R3.4b unspent money


  • Login