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Major investment in new plant, equipment and skills development - DTI Industrial Strategy

SUSTAINABLE INVESTMENTS BY STRATEGIC EQUITY PARTNERS. Major investment in new plant, equipment and skills development - DTI Industrial Strategy Access to new markets (NATO) and capital - Increased export earnings for SA ( fiscus , local suppliers etc.)

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Major investment in new plant, equipment and skills development - DTI Industrial Strategy

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  1. SUSTAINABLE INVESTMENTS BY STRATEGIC EQUITY PARTNERS • Major investment in new plant, equipment and skills development - DTI Industrial Strategy • Access to new markets (NATO) and capital • - Increased export earnings for SA (fiscus, local suppliers etc.) • Significant increase in self-funded R&D/technology development • Centres of excellence established: • Specialised steel and alloy gear manufacturing – TMA • Engine & gearbox manufacturing and MRO - TMA • Hand held optical systems – CZO • New optical manufacturing facility established in September 2010 – CZO • New generation 105mm & 155mm ammunition – RDM • All forging work carried out in SA (discontinued in Germany) - RDM • Security of supply to the SANDF

  2. DENEL’S JOURNEY TO SUSTAINABILITY 4 years to 2010 18 months to 2012 Vision:To be the respected South African provider of innovative Defence, Security and related technologies Denel 2007-2010 steps taken Business development Denel operations decentralised Cost-cutting - Supply Chain Restructuring and retrenchments Governance policies implemented, internal control systems and processes improved Funding and recapitalisation Denel Future State Denel 2010 Defence – Profit R200m Aerostructures – Loss 283m Performance management King III Equity partnerships providing investment and access to markets Restructure DSA Business development initiatives Denel 2005/6 Challenges - Workforce 10,000 - Export orientated company - Centralised organisation - Poor stakeholder alignment - Governance challenges - Poor programme management - Ageing plant and equipment - Poor human capital development and transformation - Market access constraints Disposal of non-core entities Leadership development Defence – Loss R1.3bn Aerostructures – Loss R300m Entity boards, audit and risk committees, risk management and financial discipline Transformation initiatives Improved programme performance Local client relationship and stakeholder alignment improvements, 61% of revenue 2

  3. DENEL FUTURE STATE Stakeholder alignment Joint DPE/DoD with NT participation Key capabilities required by the SANDF Equity partnerships: Missiles DLS Consolidation of Denel Aviation and SAAF MRO to avoid duplication Minimum multi-year orders and smoothened cash flows: DLS, PMP, Aviation, Dynamics, OTB

  4. Improved Access to Sustainable Markets Equity Partnerships (Existing and New), Export Growth, Local Spend (Home Market Support) Operational Excellence Performance, People, Skills Development, Outsourcing, Supplier Development Deepen Relationships with Defence Community and State Agencies Joint Planning, International Marketing Support, Technology and IP Development, Skills Transfer, Programme Delivery Strengthen Governance and Financial Management Sustainability, Risk Management, Compliance, Cash Flow Management and Contracting Towards a Respected South African Company Transformation, BBBEE, Employment Equity, CSI, Branding 2009 STRATEGIC DRIVERS - IN RESPONSE TO MARKET CONDITIONS

  5. ACHIEVEMENTS: 2009 – 2010 (SHAREHOLDER’S COMPACT)

  6. HUMAN RESOURCES Overview and Achievements 2006 – 2010

  7. TOTAL GROUP WORKFORCE PROFILE 2006 – TO DATE

  8. EMPLOYMENT EQUITY - STEADY PROGRESS TOTAL WORKFORCE PROFILE 8120 7634 7276 7198 7460

  9. Programmes: Talent Management Programme; System Engineer Development Programme; Mentorships; Bursaries and study loans Denel Technical Academy (DTA): Currently 352 apprentices in training Denel Youth Foundation Training Programme (DYFTP): Circa 50 learners enrolled p.a. for Maths and Science Bridging Programme Pre-employment Programmes: Schools Outreach Programmes (SOP’s) Maths and Science improvement programmes Supports Dinaledi Programme (175 learners from 2007 to date) SA Women in Engineering (SAWOMENG) Bursaries (440 bursaries since 2006 to date) SKILLS DEVELOPMENT PROGRAMMES

  10. HUMAN RESOURCES ACHIEVEMENTS – 2006 to date Succession planning: Framework introduced during 2009. Potential Successors identified. Personal Development Plans (PDP’s) currently being developed . Leadership Development: Competency Framework designed in 2009. A Development Programme is being implemented . UNISA SBL has been retained for executive development from 2011. 3rd Annual Senior Leadership Symposium(Top 100 leaders): This year’s theme is – “Business Development”. Group Skills Development Strategy: Being developed to mitigate the effects of skills scarcity and an ageing workforce Employee Attrition Rate: The total attrition in the group has reduced to 4,5% compared to 13,8% in 2006. Target is to remain between 4,5%-7% p.a.

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