DEFENCE MATÉRIEL DIVISION Plans for Local Procurement Through Public Procurement Policy to Support SMMEs and Cooperatives

DEFENCE MATÉRIEL DIVISION AIM To present the Department of Defence’s response to the focus points that support the integrated approach to stimulate radical economic transformation through entrepreneurship. 2

DEFENCE MATÉRIEL DIVISION APPROACH The Parliamentary Committee on Small Business Development sent a list of questions to the Department of Defence pertaining to small business support through public procurement. The approach taken in this presentation is that of responding to each of these questions. 3

DEFENCE MATÉRIEL DIVISION FOCUS AREA 1  Has there been an interaction between the department invited here today and the DSBCD to plan on how the two departments would work together to develop SMMEs and Cooperatives with the aim of reducing poverty, inequalities and creating jobs ? 4

DEFENCE MATÉRIEL DIVISION CONSULTATION BETWEEN DoD AND DSBD  Consultation is ongoing between the DoD and the DSBD. This will culminate in the signing of an MOU between the two departments. 5

DEFENCE MATÉRIEL DIVISION MARKETS AND SKILLS DEVELOPMENT  What market and skill development opportunities exist in each departments?  Markets and related skills development:  Logistics  Retail, motor trade, maintenance and repairs  Wholesale trade  Catering, accommodation and travel  Transport, storage and communication  Furniture manufacturing, maintenance, repairs and recycling  Printing etc 6

DEFENCE MATÉRIEL DIVISION DOD EXPENDITURE ON GOODS AND SERVICES  What is the total budget expenditure on good and services of each department?  ±R11,337bn (Only RB2.8 acquired through service centres)  This encompasses spending on Goods and Services, such as:  Business and advisory services  Infrastructure and planning  Laboratory services  Legal costs  Contractors  Agency and support/outsourced services 7

DEFENCE MATÉRIEL DIVISION FOCUS AREA 4  What steps have been taken by the department to achieved the target of 70% local procurement?  Requirement to adhere to 70% local procurement is incorporated in all applicable terms of reference of the advertised bids. 8

DEFENCE MATÉRIEL DIVISION FOCUS AREA 5  What steps have been taken by the department to achieve the target of 30% procurement from SMMEs and Cooperatives?  Local foot print (i.e. Provincial and Local foot print) is prioritized when awarding bids. 9

DEFENCE MATÉRIEL DIVISION TOWARDS 30% PROCUREMENT from SMMEs and COOPERATIVES Procurement centres procure from suppliers that are nearest to the procuring unit. For FY2014/15 the Central Procurement Service Centre spent RB2.8 on procurement of goods and services from SMMEs. 10

DEFENCE MATÉRIEL DIVISION SPEND ON GOODS AND SERVICES Seriel No:Service/CommodityTotal Amount 1Total CPSC Spend for 2014/15RB2.8 2Total Direct SMME SpendRM434 3Indirect SMME Spend (i.e. sub- contracting) RM560 4Total % on SMME’s35% 11

DEFENCE MATÉRIEL DIVISION Focus Area 6  What role is played by the department to influence big companies who are suppliers to the department to use their Corporate Social Responsibility budget in a developmental manner  Suppliers are involved in social community upliftment initiatives 12

DEFENCE MATÉRIEL DIVISION SMME CONTRIBUTION TO SADI 15,000 EMPLOYEES TOTAL TURNOVER TOTAL MEMBERS 77 R15.8 BN R500M CONTRIBUTION 62% SMME’s 3% CONTRIBUTION 13% EMPLOYEES 13

DEFENCE MATÉRIEL DIVISION DENEL’S CONTRIBUTION TOWARDS SMMES DEVELOPMENT Cooperation with SMMEsDenel trades with various SMMEs. An enterprise development programme has been developed to support SMMEs. Percentage (%) support to SMMEs (BBBEE) Spend on black owned companies constitutes 22% black, black women owned 8.1% and black youth owned 1% of total spend. Contribution to SMMEs and Cooperatives Through the Enterprise Supplier Development initiative, Denel has developed 25 suppliers at a total cost of R17.3m. (excluding spend on suppliers) 14

DEFENCE MATÉRIEL DIVISION FOCUS AREA 7  Is there a system in place in the department that encourages investment of suppliers in underdeveloped areas?  Through MOU between the DoD and the North West Provincial Government, the DoD is contributing to the government strategic imperative of rural development. Amongst the aspects to be covered by this project are the following: 15

DEFENCE MATÉRIEL DIVISION INVESTMENT IN SUPPLIERS FROM UNDERDEVELOPED AREAS  Agricultural interface  Industrial and services sectors  Human resources and  Infrastructure development  The first pilot project is to be implemented in the North West in FY2016/17. 16

DEFENCE MATÉRIEL DIVISION FOCUS AREA 8  Does the department adhere to 30 days payment policy for SMMEs and Cooperatives?  Yes, with effect from date when legitimate/compliant invoice is received.  The DoD’s target for payment of suppliers within 30 days is 75%.  For the 1 st Qtr of FY2015/16 72 % was achieved. 17

DEFENCE MATÉRIEL DIVISION CORRECTIVE ACTIONS TO ADDRESS THE DEVIATION  The Department finalised an investigation to trace the root causes of delays in payments. An action plan has been formulated to improve performance and solve the issues identified.  The process to electronically track invoices from receipt to payment has been developed. FMS has been enhanced to cater for this process and to include additional controls in the monitoring process.  Improved and integrated training between SCM and Finance are being developed 18

DEFENCE MATÉRIEL DIVISION FOCUS AREA 9  Is there a person in the procurement unit of the department who has knowledge and understanding of the cooperatives concept and benefits of supporting cooperatives in the process of developing communities to become self- sufficient and self-reliant?  Yes. Initiative to register the Military Veterans Cooperatives is in process. 19

DEFENCE MATÉRIEL DIVISION FOCUS AREA 10  How aligned is the strategic plan of the department is to the strategic plan of the Department of Small Business and Cooperatives Development in order to achieve the NDP goals of reducing poverty to 0% by 2030 and 11 million more jobs by  Youth empowerment initiatives are at an advanced stage to ensure that youth are a key target group for economic opportunities. 20

DEFENCE MATÉRIEL DIVISION YOUTH LEADERSHIP DEVELOPMENT PROGRAMME (YLDP) STATISTICS INTAKEDATEVENUECOMPLETEDREMARKS 0110 Feb-03 May 2014Kimberly Sep-31 Oct 2014Kimberly Sep-03 Dec 2014Saldanha Apr-12 Jun 2015Kimberly at DRDLR ThabaNchu College 0526 Jul-30 Oct 2015 Current intake Kimberly TOTAL

DEFENCE MATÉRIEL DIVISION YLDP…  Discipline and drill  Physical training  Leadership  Civic education  Life skills  Youth regeneration  Diversity management  Environmental management  Public Service induction  Communication and social responsibility The following modules are covered in the Youth Leadership Development Programme: 22

DEFENCE MATÉRIEL DIVISION Alignment to Government Strategic Priorities  Goal 4 of the recently approved Defence Review 2015 addresses developmental and other ordered tasks, whereby the DoD can in terms of Task 13 contribute to the developmental agenda as outlined in the government strategic priorities. 23

DEFENCE MATÉRIEL DIVISION ALIGNMENT TO GOVERNMENT STRATEGIC PRIORITIES  Accelerate supplier targeting for women and youth  Increased oversight on big companies Corporate Social Responsibility (incorporate in ToR)  Increased oversight on supplier investment in underdeveloped areas (incorporate in ToR) 24

DEFENCE MATÉRIEL DIVISION ALIGNMENT TO GOVERNMENT STRATEGIC PRIORITIES…  Compliance to applicable legislation i.e. PPPFA  Utilisation of a comprehensive supplier database  Marketing opportunities to suppliers through the annual Suppliers Day and Industry Day 25

DEFENCE MATÉRIEL DIVISION CONCLUSION  The DoD is committed to advancing the development of SMMEs and Cooperatives through collaboration with other relevant stakeholders.  Efforts are in progress to ensure full alignment with government intent to accelerate economic transformation and alleviate poverty, inequality and unemployment. 26

DEFENCE MATÉRIEL DIVISION Questions & Comments Thank You!