industrial participation programme progress report march 2002
TRANSCRIPT
Industrial Participation Programme
Progress Report
March 2002
Structure of the report
• Background
• Summary of Performance
• Report on Large Obligors and Projects.
Background
• Obligations in the industrial participation arise from 3 sources;
- Parastatals: eg. SAA and Telkom - SPA’s: these are proactive agreements eg. GE - Defence: this includes a NIP and DIP ( focused on
defence sector) component.
• The largest obligations come from the defence and aviation sectors. Strategic Defence Package came into effect April 2000. The obligations will be discharged over a period of 11 years ( 2000 – 2011).
Background cont.
• Contracts with obligors contain detailed targets and milestones that need to be achieved over the duration of the contract.
- NIP targets are set at 3 ,5, 7 year intervals - DIP Targets set at 6 monthly/ annual intervals
• Total investment and export obligations is about USD 14 billion.
• All projects must be viable and sustainable beyond contract period.
• Commitments are firmly spelt out in contract but projects may be substituted where they are not viable.
Background
• A performance review of obligors is undertaken every six months. Obligors are required to submit reports on meeting investment and export/ sales targets. There is at present no requirement to report on employment,assistance to BEE and SMME’s. This is being amended to better measure these variables.
Progress to date (NIP)
• 1997 – 2000: Non – Defence
- investment and exports of USD 300 million facilitated.
- Mainly involved Telkom and SPA’s
- key companies involved are Siemens, Ericson, GE, Alcatel
- covered ICT and engineering sectors
• April 2000 – Dec 2001
First phase of program involved the finalisation and consolidation of investment and export projects – 33 projects have been approved to date.
Progress to date
• By end of 2001 eighteen (18) projects had completed the construction and investment phase and commenced production.
– Projects cover engineering, aviation, agro – processing and beneficiation.
• Further 6 projects will commence operations by June 2002.
• NIP Projects are expected (base case) to generate USD 5 billion investment and exports by 2004.
Progress to date (DIP)
• Approximately 38 local companies are engaged in Defence Industrial Participation (DIP) manufacturing and export activities
• Investment and exports contracts of R2,1billion have been placed with SA based firms (March 2002).
• A number of local firms are engaged in the production of sub- systems and components for the main contract– this includes assembly of corvette engines/ gear box components and avionic systems.
• Additional spin-offs have been the integration of local firms into Agusta and BAE/SAAB global supply chains – e.g.. exports of 12 Agusta helicopter frames to Sweden and participation in Grippen programme in other European countries.
Performance vs. Targets
• DIP contractual targets are set at 6 monthly/ annual intervals.
• Accumulated target as at March 2002 is R1,9 billion and the orders placed at this date amount to R2,1 billion - target exceeded by over R200 million.
• NIP targets are set at 3, 5 and 7 year intervals.
• The current level of exports and investments stands at approximately USD 400 million. This excludes confirmed export orders of over USD 500 million placed with SA Chrome, Evertrade, Forest Products.
Performance continued
• First NIP milestone of US$3 900m to be achieved by 2003/2004
• Approved and active NIP projects are expected to generate US$ 5bn ( base case scenario) by 2004.
• The NIP and DIP program has thus far resulted in the creation and retention of approximately 5050 jobs.
Summary of Performance (DIP)
Obligation ZAR 14 000 million
Milestone at 03/2002 ZAR 1 900 million
Performance as at 03/2002
ZAR 2 100 million
Summary of performance (NIP)
Overall performance
5,008.72
3,988.43
0.00
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
Approved/active projects Milestone in 2003/2004
US$
m
Total Obligation vs. Milestones
Company Total Obl. USDm
Invest.
USDm
Exports
USDm
Duration
Years
Milestone
2003/2004
BAE/SAAB 7 200 2 000 5 200 11 2 300.0
Ferrostaal 2 685 960 1 725 7 923.4
Thyssen 1 703.4 317.4 1 386 7 444.0
Thales 652.4 191 462 7 278.4
Agusta 767.9 185 583 7 42.6
TOTAL 13 410.7 3 653.4 9 356 3 988.4
Individual Performance: Agusta
• Agusta needs to achieve an investment and export target of USD 42, 6 million by 2003.
• Agusta has exceeded export targets of over USD 30 million almost 18 months ahead of schedule. DIP targets also ahead of schedule.
• Investment in Jewellery plant in Cape Town and Wool – mohair plant in Eastern Cape has generated exports of USD 35,8 million.
• Feasibility study for establishment of Silicon Smelter near Saldanah has been initiated. This is a joint venture between an Italian company, Novamet, a local SA firm as well as the IDC and Eskom.
Agusta projects
Project Description Value Investments Exports
Filk Gold Chains 84.7 5.0 79.7
Cape Mohair 13.2 1.5 11.7
Silicone Metal 222.2 37.7 184.5
TOTAL 320.1 44.2 275.9
Agusta
Spinners & Knitting Plant
Active
Gold Jewellery
Silicon Metal-
Saldanah Bay
Thyssen
• Engaged in 5 projects which are forecast to generate exports and investment of USD 1, 6 billion over period of contract. Has met all DIP targets.
• Has already facilitated the signing of an off-take agreement to purchase five years of production of a new chrome plant. Exports of USD 5OO million to be generated.
• A greenfield project (manufacture of aluminium tubes for
the automotive industry) commenced operations in KZN in December 2001. Over 50 % of production will be for exports.
Thyssen Projects
• Exports of automotive components and capital equipment has also commenced.
• A plant producing German Beer is being established in East London. A site has been identified and a tender for the construction of the plant has been issued.
• The pre- feasibility study for the establishment of a low cost Titanium Plant has been completed and negotiations with Mintek and other local partners are underway.
Thyssen projects
Project Description Value Investments Exports
Aluminium tubes 37.16 2.2 34.96
Low cost titanium production
619.0 259.0 360.0
Auto components 70.0 0 70.0
Ferrochrome 590.5 18.5 572.0
TOTAL 1316.7 279.7 1036.7
ThyssenKrupp
PE/Coega
Ferrochrome
Aluminium tube plant
Brewery
Thales
• All four projects submitted by Thales have commenced operations – the company needs to attain an investment/export target of US$ 270 million by 2004.
• The export of solar panels and silicon metal have commenced. This has already generated USD 6.4 million in export earnings.
• Evertrade Medical – a waste facility and bin manufacturing plant commenced operations in January 2002. Off-take agreements for exports have been signed with Steri Cycle, a Nasdaq listed company.
Thales projects
Project Description Value Investments Exports
Silicone smelter upgrade 14.1 3.3 10.8
Silicone fume dioxide 10.6 1.9 8.6
Solar panel extension 111.0 6.0 105.0
Evertrade Medical 171.2 63.6 107.6
TOTAL 306.9 74.9 232.0
Thales
Solar Panel Manufacture
Silicon Smelter Upgrade
Silicon Fume Densification Plant
PIETERSBURG
Medical Waste
THALES
Individual Performance : Ferrostaal
• Ferrostaal is mainly engaged in Stainless Steel Beneficiation Projects.
• Land has been purchased in Krugersdorp for the establishment of a plant to manufacture stainless steel conveying pipes.
Ferrostaal Projects
• The building of a Condom Plant is presently underway in East London. This is joint venture involving Condomi, a large German manufacturer, Ferrostaal and local BEE groups. The plant should be operational this year.
• A Venture capital fund valued at USD 30 million has been established to finance existing projects and assist BEE and SMME groups.
• Export of engineering and processed agricultural projects has commenced.
Ferrostal projects
Project Description Value Investments Exports
Precision strip 538.25 100.0 438.3
Steel beneficiation 167.4 80.0 87.4
Conveying pipes 295.0 10.0 285.0
Ferisa Fund 30.7 30.7 0.0
Condom project 72.6 15.0 57.6
Eng. Services 20.0 0.0 20.0
Agro-Processing 30.0 30.0 0.0
Special Steel products 564.0 250.0 314.0
TOTAL 1718.0 515.7 1202.3
Ferrostaal
Conveyor PipesValue-added SteelVenture Capital Fund
Value added Steel
PE/Coega
Condoms
BAE/SAAB
• BAE/SAAB carries almost 50 percent of the total SDP obligations.
• Engaged in over 20 investment and export promotion projects. These projects are forecast to generate investments of USD 300 million and exports of USD 2 000 million by 2004. All DIP targets have been met.
• Has achieved close to 50 percent of NIP investment target of USD 300 million. This included facilitating investments in Global Forest Products, Swedish Match, Ecoplug, Elgin Brown and Hammer and Kolbenco Pistons.
BAE/ SAAB Projects
• Exports of mining tools, automotive, power – generation equipment of generated earnings of over USD 120 million in 2001.
• Investments have also been facilitated in the automotive and jewellery industries - a gold beneficiation and two jewellery manufacturing operation has been established in Virginia.
• The plants will commence full production in the first half of 2002. The construction of the plants has been completed and machinery has already been installed in one of the plants. Approximately 1000 direct jobs will be created.
BAE/SAAB projects
Project Description Value Investments Exports
Mining equipment prod. 36.5 2.5 34.0
Electrolux appliances 10.2 10.2 0.0
ABB Procurement 253.0 0.0 253.0
Volvo Components 67.0 5.0 62.0
Dunlop Tyres 65.0 15.0 50.0
Elgin Brown & Hamer 142.0 24.3 118.0
Export Promotion 15.0 0.0 15.0
Air Fuel System 42.0 7.0 35.0
BAE/SAAB projects
Project Description Value Investments Exports
Gold Beneficiation 637.0 42.0 595.0
Soy Protein 299.0 19.0 280.0
Package Tourism 47.0 0.0 47.0
IT Export 30.0 0.0 30.0
Global Forest 171.0 90.0 81.0
Ecoplug 12.0 0.0 12.0
Swedish Match 120.0 120.0 0.0
Die Castings 30.0 10.0 20.0
BAE/SAAB projects
Project Description Value Investments Exports
Gold jewellery manufacture
46.0 11.0 35.0
Carbon manufacture 111.0 30.0 81.0
ABB project (Africa) 114.0 21.0 93.0
Car Pistons 75.0 6.0 69.0
RSAM Gold chain 82.0 10.0 72.0
TOTAL 2 405.0 423.0 1982.0
BAE/SAAB
Industrial agripark
Gold beneficiation
Export promotion of batteries
Protein manufacture
Air fuel system
Automotivecomponentspurchasing
Export promotion
Charter tourism
Active
Atlas copco Global forest
Gold jewellery manufacture
Electrolux
Ecoplug
ABB procurement
Boeing
Key Projects
• Provides Aerosud with technology transfer and export orders for aircraft interior components.
– Will provide 80-90 new jobs when new facilities open in May 2002
Training, support and technology transfer for SAA Technical to carry out aircraft maintenance and modification work.
– US$96.5 m of work to be provided over seven years
Siemens
Key Projects
• Manufacture and export of main distribution frame connector strips
• Development and upgrade of fixed and mobile switching software for Siemen’s international customers
Ericsson
Key Projects
• Subcontracting of R&D work, construction and maintenance work for fixed and mobile networks
• Manufacture and export of mechanical access module magazine for microwave equipment
Alcatel Altech
Key Projects
• Subcontracting of R&D, design, construction and installation by Alcatel in France. Susbstantial involvement in GSM roll out in the DRC
• Manufacture of Digital Enhanced Cordless Telephone system components for export markets
Summary
• The investment and construction phases in a large number of projects was completed between 2000 and 2001 – over 18 projects were launched in this period.
• The next two years should see a significant increase in exports as plants reach full capacity and the next phase of projects are launched.
• The finalisation of additional projects in the aluminium, automotive and tourism sectors are also at an advanced stage and will be reported once all contractual arrangements has been completed.