1. DENEL GROUP 1 Presented by: Patience Mushungwa Group Executive: HR & Transformation Date: 19 March 2010 DENEL PRESENTATION TO PARLIAMENT DENEL GROUP

2. 2 DENEL GROUP STRUCTURE Personnel employed by Denel Group: Denel: 5 117 Ass. Companies: 2 204 TOTAL: 7 321

3. DENEL GROUP 3 REWARD STRATEGY Denel’s remuneration strategy is aimed at the following: – Align managers and employees behaviour with Denel strategic intent and objectives. – Implementation of a remuneration strategy that will assist in turning Denel around. – Enabling attraction and retention of competent, performance driven employees. – Creating a performance driven culture and reward performance. – Inculcating a commercial mindset and improve Human Capital returns. – Implementing market related remuneration, incentive and reward principles.

4. DENEL GROUP 4 PERFORMANCE MEASURES, AND HIGH LEVEL OBJECTIVES OVERALL GROUP TARGETS 2009/10 100% PEOPLE & TRANS- FORMATION – 20% B-BBEE – 12% Improvement of Organisational Climate – 5% Performance Management – 3% FINANCE - 60% Net Profit/Loss – 25% Cash flow before Financing – 20% Clean External Audit 9% Resolution of Internal Audit Findings – 6% OTHER – 20% e.g. Strategy, Multi-year order book

5. DENEL GROUP 5 PERFORMANCE MANAGEMENT PROCESS & PROCEDURE Pre-Planning Performance and Development Plan Informal Interim Review June Informal Interim Review June Variable Pay Determination (if applicable) Planning 1 st Formal Review Sept/ Oct 1 st Formal Review Sept/ Oct Coaching Informal Interim Review December Self Evaluation February Review Last Formal Review March

6. DENEL GROUP 6 Talent Acquisition Talent Retention Talent Deployment Talent Development Organisation Culture Business Strategy Available Skills Pools Educational Health War for Talent Labour and EE Legislation Talent Management System, Process, Tools & Metrics Strategic HR/Talent Plan HR Policy & Processes Performance Management Remuneration Promotion Transformation Diversity Empowerment HR Policy & Processes Performance Management Remuneration Promotion Transformation Diversity Empowerment Leadership People Management TALENT MANAGEMENT MODEL

7. DENEL GROUP 7 Individuals complete Information on eTalent: Biographics Qualifications Experience Interests Job Motivation Retention Factors (22) Information is analysed and reviewed in Talent Management workshop where Collective Retention Risks are indentified and Corrective Actions decided on. Individual dialogue sessions on personal retention risks and career development Talent Management Workshop with Senior Management to review outcome of Individual Discussions and to agree and update Career Development and Deployment Actions Line management Coaching on how to conduct Individual Dialogue Sessions Managers review individuals and capture assessment information on eTalent: Performance Potential Next Career Moves Competencies Replaceability IMPLEMENTATION PROCESS

8. DENEL GROUP 8 Leading Business Group Visioning and Strategy Global Trends Growing the Enterprise Corporate Diplomacy Strategic Stakeholder Management and Communication Networking and lobbying High Performing organisation Leading Change Organisational Sustainability and Resilience (Learning Organisation) Leading Self Personal Branding Personal Modeling  Leading People Executive Succession and Coaching Inspirational Leadership Leading Business Strategic Alignment / Operationalsing Strategy Business Process Analysis,and Optimisation Balanced Scorecard, Tracking Business Performance Communication (Internal and External) Advanced Customer Relationship Management/ Collaborative Strategies Analytical skills/, Simulation and Business Modelling Advanced Negotiation Entrapreneurial Skills and Deal Making Leading Change Change Management Tools and Techniques Leading self Personal Mastery and Authenticity Team Mastery Leading People Talent Management Capacity Building,Skills transfer and Empowering Teams Team Dynamics, Team Mastery, Collaboration and Resilience Leadership Approaches Cultural Mastery Transformational Leadership Leading Business Leadership Essentials (Planning, Organising Leading and Control) Understanding Business Objectives Quality Management Execution Basic Diagnostic Skills Customer Relationship Leading Change Change Orientation Leading Self Personal Leadership, Self awareness & Personal Strengths Stress Management Creativity Leading People Human Resource Management Coaching for Performance and Development Conflict Management Interpersonal Communication Relationship Building Delegation First Line Senior Management Executive Leadership Operational Focus Strategic Focus LEADERSHIP COMPETENCY FRAMEWORK

9. DENEL GROUP 9 DENEL LEADERSHIP DEVELOPMENT PROGRAMME

10. DENEL GROUP 10 STATUS AND FILLING OF VACANCIES FOR EXCO & ENTITY CEO’s Status on vacancies as at 15 March 2010 0 Filling of vacancies: Denel will follow its recruitment policy and process to fill the vacant positions, when they do arise.

11. DENEL GROUP 11 DENEL REMUNERATION PRINCIPLES Denel’s Remuneration and Reward model is in line with best practise. It comprises: – An incentive element incorporating performance based Variable Pay, aimed at driving required behaviour in achieving overall financial and key strategic objectives. – A performance management element aimed at recognising and addressing individual employee performance. – A market related Fixed Pay element aimed at addressing current pay disparities in relation to market remuneration.

12. DENEL GROUP 12 REMUNERATION - EXECUTIVE TEAM # MinimumAverageMaximum Hay Units126216952812 RemunerationR1,320,000R2,060,070R3,570,800 # CEO’s excluded

13. DENEL GROUP 13 REMUNERATION - EXECUTIVE TEAM (cont) Remuneration of Exco members based on market and also DPE’s Guidelines on Remuneration of Executives (published August 2006). Personnel and Remuneration Committee recommends remuneration of Executives to the Board for approval. Denel aims to pay on the 50 th percentile of the market but currently 80% of managers’ remuneration is below 25 th percentile of the market.

14. DENEL GROUP 14 REMUNERATION PHILOSOPHY – BOARD OF DIRECTORS  Remuneration philosophy is based on the DPE Publication, “State Owned Enterprises: Remuneration Guidelines – Part A (Chairpersons & Non-executive Directors)”; including market benchmarks used to determine the fees paid to the non-executive directors.  The Personnel and Remuneration Committee reviews the fees that the Group pays to the non-executive directors and the recommendations are presented at the annual general meeting for Shareholder approval.  Board members are remunerated according to the policy that govern Remuneration for Board Members:  On a retainer fee basis for the Chairman;  On a fixed fee per meeting for: – Non-Executive Board membership; – Committee membership; and – Subsidiary Board, or Committee membership.

15. DENEL GROUP 15 REMUNERATION TABLES FOR DENEL BOARD  CHAIRMAN RETAINER PER ANNUMR 715 000  Non-Executive directors: Per meeting2009/10 Remuneration 1. Denel Board meeting: Non-Executive member17 910 2. Denel Audit & Risk Committee meeting: Chairman31 958 3. Denel Audit & Risk Committee meeting: Non-Executive member15 180 4. Denel P&R Committee meeting: Chairman21 789 5. Denel P&R Committee meeting: Non-Executive member14 236

16. DENEL GROUP 16 REMUNERATION TABLES FOR SUBSIDIARY BOARDS AND COMMITTEES  Business Entity per meeting: 1.Business Entity Board meeting: Chairman10 746 2.Business Entity Board meeting: Non-Executive member8 955 3.Business Entity Audit & Risk Committee meeting: Chairman9 108 4.Business Entity Audit & Risk Committee meeting: Non- Executive member 7 590 5.Business Entity P&R Committee meeting: Chairman8 541 6.Business Entity P&R Committee meeting: Non-Executive member 7 118

17. DENEL GROUP 17 DENEL EXCO & ENTITY CEOs TURNOVER (2007 – 2009)

18. DENEL GROUP 18 DEMOGRAPHICS OF EXECUTIVE TEAM WhiteAfricanColouredIndian GRAND TOTAL MaleFemaleMaleFemaleMaleFemaleMaleFemale 31 Mar 2007 3221101010 30%20% 10% 0%10%0%100% 31 Mar 2008 321100108 37.5%25%12.5% 0% 12.5%0%100% 31 Mar 2009 202100106 33.3%0%33.3%16.7%0% 16.7%0%100% 31 Mar 2010 202100106 33.3%0%33.3%16.7%0% 16.7%0%100%