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ARMAMENTS CORPORATION OF SOUTH AFRICA, LIMITED BILL

ARMAMENTS CORPORATION OF SOUTH AFRICA, LIMITED BILL. SELECT COMMITTEE ON SECURITY AND CONSTITUTIONAL AFFAIRS. WEDNESDAY, 08 OCTOBER 2003. Scope of Presentation. Changes to the strategic environment necessitating a review of the existing Act. Process to draft the proposed Bill.

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ARMAMENTS CORPORATION OF SOUTH AFRICA, LIMITED BILL

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  1. ARMAMENTS CORPORATION OF SOUTH AFRICA, LIMITED BILL

  2. SELECT COMMITTEE ON SECURITY AND CONSTITUTIONAL AFFAIRS WEDNESDAY, 08 OCTOBER 2003

  3. Scope of Presentation • Changes to the strategic environment necessitating a review of the existing Act. • Process to draft the proposed Bill. • Summary of Object and Functions of the existing Act. • Summary of pronouncements envisaged in the proposed Bill.

  4. CHANGES TO THE STRATEGIC ENVIRONMENT (ISSUES NECESSITATING A REVIEW OF THE EXISTING ACT)

  5. Changes to the Environment • The shift of the production capabilities of Armscor to the new public entity Denel in 1992. • The shift in Arms Control responsibility to the National Conventional Arms Control Committee in 1995.

  6. The establishment of the Defence Secretariat in 1995 with a dedicated Division to deal with defence acquisition. • The call in 1999 as contained in the ‘White Paper on the Defence-Related Industry’ for a review of the Armaments Development a Production Act.

  7. PROCESS TO DRAFT THE PROPOSED BILL

  8. Committee Members • Armscor • Department of Defence (various divisions) • Department of Public Enterprises (represented by Denel Legal Division) • Department of Foreign Affairs • Department of Trade and Industry • The National Treasury • South African Aerospace, Maritime & Defence Industries Association • Conventional Arms Control • CCR (UCT)

  9. Specialist Consultation • The Auditor-General • The Accountant-General • The State Tender Board • The Institute of Government Auditors • National Treasury (State Assets & Public Entities)

  10. Scheduling of Armscor within the Context of the PFMA • Armscor currently listed as a Schedule 2 National Public Entity. • Study jointly commissioned by the Ministers of Defence and Finance to investigate and verify the scheduling of Armscor. • Ministers accepted recommendation to re-schedule Armscor as a Schedule 3 Part B ‘National Government Business Enterprise’. • PFMA Amendment Bill to include re-scheduling of Armscor.

  11. THE PRONOUNCEMENTS OF THE EXISTING ACT (ARMAMENTS DEVELOPMENT AND PRODUCTION ACT) (Act No. 57 of 1968)

  12. Current Objective of Armscor To meet the armaments requirements of the Republic, including armaments required for export

  13. Current Powers & Functions • To take over and expand any undertaking of the Armaments Board for the manufacture of armaments. • To promote or assist in the promotion of companies. • To lend or advance money to a person or company. • To provide or underwrite or otherwise to assist in the subscription of capital for such company. • To acquire an interest in any company. • To obtain or establish facilities. • To investigate or research the manufacture, maintenance, testing, inspection or development of armaments.

  14. To promote and co-ordinate the development, manufacture, standardization, maintenance, acquisition or supply of armaments. • To collaborate with, assist, render services to, or utilize the services of, any person, body or institution or any Department of State. • To acquire, modify, test, inspect, lease, dispose of, lend or let armaments. • To enter into contracts for the manufacture, modification, maintenance, testing or inspection of armaments.

  15. To enter into contracts with persons in the Republic or elsewhere for the supply or rendering of armaments and/or services. • To advise the Minister on any matter relating to armaments. • To stock-pile strategic raw matériels, matériels and components for the manufacture of armaments. • To collaborate with any educational, scientific or other body or institution in connection with training of persons for professional or technical services.

  16. On its own account, or as a representative of another person: • To develop, manufacture, service, repair and maintain armament. • To buy, sell, import or export and, to promote the sale of, armaments. • To export armaments. • To exercise control over Armaments with respect to: • Development. • Manufacture. • Acquisition. • Supply. • Export. • Marketing.

  17. SUMMARY OF THE PROPOSED ARMSCOR BILL(Synopsis of Key Policy Tenets)

  18. Continued Existence of the Corporation • The Armaments Corporation of South Africa, Limited (Armscor) continues to exist under that name despite the repeal of the Armaments Development and Production Act. • State remains sole shareholder of the Corporation. • The Minister shall exercise the powers of ownership control over the Corporation on behalf of the State.

  19. Status of the Corporation • The Corporation is a juristic person capable of suing and being sued. • The Corporation may: • Purchase acquire, hold or alienate property, moveable or immovable. • Performs acts as are necessary for the carrying out its objects and performing its function. • It is a punishable offence for other persons to conduct business using Armscor’s name. (Fine or imprisonment not exceeding five years or both).

  20. Objectives of Corporation • To meet the defence matérielrequirements of the Department effectively, efficiently and economically. • To meet the defence technology, research, development, analysis, test and evaluation requirements of the Department effectively, efficiently and economically. • GAAP applies. • Emphasis is placed on efficiency, effectiveness and economy, as well as legality, fairness and transparency.

  21. Functions of the Corporation • The Corporation Must! • Acquire defence matériel for the Department. • Manage technology projects required by the Department. • Establish a programme management system for acquisition and technology processes. • Provide a quality assurance capability in support of acquisition and technology processes and any other services. • Establish a system for tender and contract management for defence matériel and if so required, commercial matériel. • Dispose of defence matériel in consultation with the original manufacturer.

  22. Functions (cont.) • Establish a compliance administration system for the Department as required by international law and domestic legislation. • Support & maintain such strategically and essential defence industrial capabilities, resources & technologies as may be instructed by the Department. • Provide Defence Operational Research. • Establish a defence industrial participation programme management system. • Provide marketing support to defence-related industries in respect of defence matériel in consultation with the Department and the industry. • Manage facilities identified as strategic by the Department in a service level agreement.

  23. Functions (cont.) • Maintain such special capabilities and facilities as are regarded by the Corporation to not be commercially viable, but which may be required by the Department for security or strategic reasons.

  24. Functions (cont.) • The Corporation may, with the approval of the Minister! • Exploit such commercial opportunities as may arise out of the Corporation’s duty to acquire defence material or manage technology projects. • Procure commercial material on behalf of any organ of State at the request of the organ of State in question. • Subject to domestic arms control legislation, perform any function which the Corporation may perform for or on behalf of any sovereign State. • Minister may impose conditions thereto.

  25. Service Level Agreements • The Corporation must enter into a service level agreement with- • The Department in respect of any function contemplated in section 4. • Any other organ of State on whose behalf the corporation procures commercial material. • Any foreign State in respect of any function contemplated in section 4(3)(a)(iii). • These are concluded between the Board (Accounting Authority) and the Accounting Officer or Accounting Authority of that Department, organ of State, or foreign State. • The contents of the agreement are specified.

  26. Board of Directors • The Board shallmanage and control the affairs of the Corporation. • 9 x Non-executive Directors • (appointed by the Minister) • (1 x Chairperson & 1 x Deputy Chairperson) • 2 x Executive directors - • CEO. • CFO. • 2 x Ex Officio members - • Secretary for Defence. • Chief of the SANDF. • The Board is the Accounting Authority of the Corporation.

  27. Board (cont.) • Non-executive members appointed by Minister on grounds of knowledge and experience which, when considered collectively, should enable them to achieve the objectives of the Corporation. • Members of National Assembly, NCOP, Provincial Legislatures or Municipal Councils are excluded from membership. • Persons appointed ito section 1 or 12A of the PSA are excluded from membership. • A non-executive member holds office 3 years. • May be re-appointed for 1 further term. • Resignation period is 1 month. • A member must vacate office if: • He or she resigns.

  28. Board (cont.) • Services are terminated by the Minister on good causes shown. • Becomes a member of the National Assembly, NCOP, a Provincial Legislatures or a Municipal Council. • Non-executive members are paid out of the funds of the Corporation such remuneration as the Minister after consultation with the Minister of Finance, may determine. • Various matters relating to meetings are prescribed.

  29. Employees • The CEO is appointed by the Board, after consultation with the Minister, for: • The day-to-day management of the Corporation. • Administrative control over employees. • The CFO is appointed by the CEO, after consultation with the Board. • Subject to written policies and procedures of the Corporation, the CEO may appoint employees as are required to perform the functions of the Corporation. • Conditions of service, including remuneration, allowances, subsidies and other service benefits must be determined by the Board.

  30. Committee’s • An Audit Committee must be established. • Any other committee may be established.

  31. Conflict of Interest • Members of the Board and Employees are required to disclose any direct or indirect interest that they, their spouse, partner, or family member may have in relation to any acquisition or procurement activity of the Corporation. • Member of the Board or Employee is required to withdraw from that activity, unless the Board/CEO decides the interest is trivial or irrelevant. • Persons found guilty of an offence may be liable to a fine or to imprisonment not exceeding 15 years or to both a fine and such imprisonment.

  32. Financial Matters • Funds of the Corporation. The funds of the Corporation shall, subject to the PFMA, consist of: • Share capital of Armscor as determined by the Minister in consultation with the Minister of Finance. • Money appropriated by Parliament. • Revenue, including interest derived from investments. • Moneys raised or borrowed by the Corporation. • Moneys obtained from such other sources as may be consistent with the objectives and functions of the Corporation. • The Corporation may establish reserves and may invest money to the advantage of the Corporation. • Income or revenue derived from the Corporations assets, interest on moneys and services rendered by it must be included in the projected annual budget and corporate plan.

  33. Audit Matters • The annual financial statements of the Corporation must be audited annually by external auditors appointed in terms of the PFMA. • The Corporation must allow any internal auditor of the Department access to all documentation pertaining to a service level agreement between the Corporation and the Department.

  34. System for Evaluating Acquisitions • Corporation must provide the Secretary for Defence with a system to evaluate all defence material acquisitions, prior to a decision being made on such an acquisition [PFMA 38(1)(a)(iii)]. • The system must: • be fair, equitable, transparent, competitive and cost-effective & comply with national legislation, and, • And be supported by a tender and contract management system.

  35. Regulations & Delegations • Regulations. • The Minister may make regulations or issue instructions regarding any matter in order to give effect to the Act. • Regulations resulting in state expenditure must be made with the concurrence of the Minister of Finance. • Delegations. • The Board may delegate any of its powers (in writing) to an official of the Corporation or a committee established in terms of the Act. • The Board may assign any employee or committee to perform any of its duties. • Delegations are subject to limitations which the Board may impose • Delegations do not divest the Board of its responsibility. • Board may confirm, vary or revoke any decision taken by a delegatee.

  36. Miscellaneous Provisions • Safeguarding of Information, Records, Property and Premises. • The Corporation may take such measures necessary for the effective protection or safeguarding of information,records and property belonging to the Corporation or any premises upon which any activity of the Corporation is being performed. • Subsidiaries. • The Corporation may, subject to the PFMA, and with the approval of the Minister, form wholly owned subsidiaries. • The Corporation may only dispose of a subsidiary with the approval of the Minister.

  37. Intellectual Property. • Intellectual property owned by the Department shall be held in the custody of the Corporation. • The Corporation must manage and utilise such intellectual property acquired for and on behalf of the Department as directed by the Secretary for Defence in a service level agreement. • Transitional Provisions. • The existing Board of Directors remains in Office, and the Chairperson and Deputy Chairperson retain these positions. • Employees remain in employ of the Corporation under their existing employment agreements.

  38. Repeal of Laws. • The Armaments Development and Production Act , 1968 (Act No 57 of 1968) is repealed. • Detail is contained in the Schedule to the Act. • Short Title & Commencement. • Armaments Corporation of South Africa, Limited, Act, 2003. • Comes onto operation on a date fixed by the President by proclamation in the Government Gazette.

  39. Thank You! Any Questions?

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