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Page 1
Centurion Aerospace Village (CAV)
CAV Presentation: Portfolio Committee on Trade and Industry
CAV CEO
03 November 2015
Page 3
What is the CAV? (Centurion Aerospace Village)
Inter-governmental Opportunities: An “Initiative” of the Department
of Trade and Industry (the dti) A GPG Industrial development
opportunity “Special Project Status” with CoT
CAV is being purpose built as a hi-tech advanced manufacturing and defense cluster
CAV is an implementation strategy for the phased approach establishment of an Aeronautical, Space and Defense Industry support mechanism to create related clusters
Aim to position South Africa as a platform for global exports through attracting foreign and local investments in Aerospace & Defense Industries
Land made available by the Department of Public Works (DPW) through the dti for 99 years effective as of 2009
Adjacent to Waterkloof Air Force Base in Centurion
Current Development Phases- Landside Development
For tenants who do not require runway access-13.6 Ha
Proposed Future Development Phases-
Airside Development Tenants who require runway access-
36 Ha Lay claim to other property
For future tenant and user requirements
Green Design
Optimised shared services’ environment and
unique value proposition in a world-class establishment
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The Turnaround Plan
A Forensic Audit was conducted of the Centurion Aerospace Village (the CAV): - Questions were put to the Minister of the
dti by the DA in Parliament
5 point repositioning of CAV in respect of the turnaround plan and hence regularisation of the business activities. These include inter alia:
– Strategic alignment with Aerospace Sector Development Plan
– Robust Policy framework in line with the PFMA, Companies Act, King III and other statutory prescripts
– Meeting ALL legal, zoning and permit processes for current (and future) operations
– Achieving the requisite institutional arrangements, board composition and investment for medium and long term sustainability and growth
– Strong focus on Human Capital development at CAV
Key elements of the turnaround business plan:
1) Objectives have been established to mitigate ALL audit findings.
2) Products and services, with emphasis on their distinguishing features and the market needs they will meet
3) Estimate of market potential and assessment of the competition
4) Board and Management Team’s experience and talent:
a) Executive changes to augment the structure and “anchor” CAV
5) Acquisition of products and services :
a) Shared services will be performed.
6) Projected financial results compared with pre-turnaround financials
7) Capitalisation of CAV by the dti (slide 18)
8) Investor framework is being developed including the dti, SEDA, leveraging off-set agreements, IDC
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Desired End State
The Desired end-state of the CAV is two-fold: – To stimulate economic development of the aerospace and defence sectors of the
economy by the formation of an industrial park cluster that business will prefer to locate in, in order to gain a competitive and cost effective advantage
– To develop a sustainable sub-tier supplier base and contribute to the growth of the Aerospace and Defence Industry by:
Creating economies of scale & agglomeration Creating logistics efficiency through co-location Identifying and relocating key Industry leaders as anchor tenants Contributing improved export performance by Aerospace & Defence Industries Promoting shared services efficiency Providing opportunities for Developing and mentoring of SMEs and B-BBEEs Providing facilities and services to complement hi levels of Technical
Competence Stimulating technical competence and R & D Providing opportunity for New Entrants to the Industry
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Strategic Goal 1: Maintain an integrated developmental model for the aerospace and defence cluster in CAV:
•Facilitation of strategic leadership in the aerospace and defence value chains through the development of the necessary strategic perspectives
•Input into other strategic frameworks of Government (i.e. IPAP VI, PGDP, SDP, SDF, Incubation ) through improved Intergovernmental and stakeholder coordination
•Governance and Compliance , including monitoring of policy and legal statutes
•Development and maintenance of the necessary Research and monitoring systems for both aerospace and defence sectors in respect of supplier co-agglomeration
Strategic Goal 2: Ensure effective implementation of the Sector Development Plan within the CAV development:
•Tenant acquisition( Ensuring right mix for sustainability, CAV branding, product portfolio marketing, special packages)
•Optimise linkages between the aerospace industry and the socio-economic benefits to be derived by Government
•Achieving wide scale economies of scope and scale – “critical mass”
•Effective Business Development
•Infrastructure management
•Investment promotion inline with commercialisation strategies of CAV
•SMME development and empowerment of B-BBEE through tenancy, services and users
Strategic Goal 3: Ensure excellence in business and resource management of the CAV:
•Business Management and Leadership
•Strategic positioning (strategic and operational planning)
•Organisational culture
•Corporate governance practices
•Business performance management
•Human Resource Management
•Financial Management
•Information and Communication Technology (ICT) Management
•Information/Knowledge Management
•Asset Management
Strategic Objectives
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Minister of Trade and Industry
CAV Board of Directors
Audit & Risk Committee
Human Resources & Remuneration
Committee
Nomination & Governance Committee
Executive Authority
Accounting Authority
Governance Sub-Committees
Governance Structure
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Challenge Mitigation
Strategic alignment with new direction
• Ensure that the CAV strategy is tangible and objectives understood • Seek Government & industry to contribute to strategic drivers through consultation
Internal and External Communication
• Adopt a “people first” approach & ENGAGE stakeholders • Ensure a detailed communication plan with roles & responsibilities • Develop a marketing and media plan (highlight results of CAV) • Make effective use of web & social media • Provide regular feedback using SMART principle
Stakeholder & brand perception • Conduct frequent communication with all stakeholders • Use surveys to test needs and market • Adopt a CRM and KAM plan • Develop a strategic advisory council to guide and provide leadership to CAV
Human resource insecurity • Deliver communication frequently • Provide job enrichment/enlargement • Promote staff career development and fair benefits/compensation
Enterprise Architecture and Change Management
• Develop and manage risk e.g. SLA /delegation frameworks • Ensure compliance to audit, risk and remco committees • Conduct frequent revision of policies and procedures • Review the enterprise architecture and develop support • Enforce disaster recovery systems
Key Challenges and Mitigation
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Pillars For Achieving
Financial Sustainability
Essential
Requirements Steps To Implement
Strategic and Financial
Planning
Business Plan
CAPEX
• Develop a 5 year strategic business plan
• Instil speed of decision making
• Secure budget commitment for 5 year periods from stakeholders
• Review overhead cost structure and management time to core
activities
Income Diversification Investment of
Time and Money
• Seek suitable tenant pipeline to achieve the critical mass
• Invest surplus cash into money market
• Seek additional funders for development i.e. SEDA, National
Tooling Initiative, DST, NYDA, DFI’s
• Facilitate with the dti to source seed capital
• Create initiatives to support “incubation programmes”
• Align management responsibility to corporate structure (change)
Sound Administration And
Finance
Long-term
Commitment
• Enforce strict debtors policy, cost reduction & tax efficiency
• Ensure cashflow positive situation
• Ensure compliance to PFMA, Treasury regulations and business
control (M&E)
Own Income Generation Effective
Leadership &
Management Team
• Drive an expanded mandate (Industrial Policy, etc), Involvement in
Provincial plans.
• Seek shareholder to cover full overhead budget
• Seek partnerships that provide in-kind and financial support
(leverage)
Strategic Profit Improvement Team Work • Enforce performance based reward & Business Balanced Scorecard
Financial Stability Considerations
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CAV is embarking on a Journey from an uncertain past into a sparkling future
CAV: The Past
Eighteen Months
CAV: The
Current programme
CAV: The Future
is Bright
What happened?: PFMA Listing Process Business Case and Bill was
developed Landside BEWI contractor
appointed ITC2 building Completed Record of Decision obtained Township Establishment MOI prepared Governmental Interaction
(IGR) Air Force interaction Establish CAV Business and
Organisation Structure
What is happening?: CEO appointment complete Finalise Business Case Conclude PFMA Listing Maintain BEWI contract Conclude Township
Establishment Process Target interested sub-tier
supplier tenants Re-establish the CAV Board Governmental MOU (IGR) Plan revenue streams &
Funding opportunities Strong focus on Human Capital
Development Meeting all legal, zoning
process for current options
What ought to happen?: Obtain Funding Implement Business Case Explore options for
institutionalisation Government IGR Rejuvenate the BEWI contract Establish the Township Conclude the Landside Phase
1a BEWI works Obtain occupancy certificate for
ITC2 Build and maintain relationship
with stakeholders Explore and obtain PPP Roll-out CAV Structure Manage revenue streams
Past, Present and Future
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Unqualified, clean audit since 2006/07
Detailed engineering design:
o For various interested parties:
o As prep for intended signing of pre-lease agreements.
o SMME support building: ITC2
o Non-destructive testing and standards:
o African NDT
o Electronic harnessing:
o Amphenol Contactserve
o Tooling:
o Quad
Architectural views:
o Per interested party
o In anticipation of future needs
Footprint layout:
o For various interested parties
o Denel Aviation
Basic general layout:
o Land and Airside
o As per area plan submitted for township establishment purposes, including:
o FAR requirements
o Bulk Earthworks
o Infrastructure
o Utility Service requirements
o EIA
o TIA
o Geo-Technical processes
CAV Achievements
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The existing and increasing levels of technical complexity associated with each product line and/or technology stream have resulted in the formation of a tiered supply chain in aerospaceThe CAV and the identified / potential tenants cover a wide variety of Aerospace and
Defense Industry technology work streams AS WAS DEFINED in the Industry Sector Development Plan (the SDP)
Sector Development Plan (SDP) Technology Streams
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Order placed by an Airline
to an OEM
Airlines Tier 3
Supplier
Value adding products
supplied to higher tier
Tier 2
Supplier
Sub-contract work to lower tiers
Core Competencies
Inside South Africa
Tier 1
Supplier
Manufacturing Activities
Outside South Africa
OEM Airlines
Completed aircraft
Supplied to Customer
Aerospace Industry Supply Chain Overview
Page 15
CAV Shared Services
• ICT
• Security
• Logistics
• Warehousing
• Packaging
• Transportation
• Customs
• Facilities Management
• Conference
• Cleaning
• Maintenance
• Waste Management
• Landscaping
• Cafeteria
• Others
OEM
Denel
Tier 1
Aerosud
Tier 1
Tier 2 Tier 2 Tier 2
Tier 3 Tier 3 Tier 3 Tier 3
• MRO
• Aircraft Refurbishments
• Aircraft Upgrades
• Maintenance, Repair & Overhaul
• High-level Sub-Assembly
• Final Assembly • Tooling, Jigs & Ground Support
• Precision & Multi-axis Machining
• Non-Destructive Testing
• Vacuform
• Composites
• Plastics
• Aircraft, components & parts painting
• Electrical & Looming
• Small Parts supply
• Paint Supply
• Bolts, screws, washers
• Engineering Services
Tier 4 down
• Airbus
• Boeing
• BAE Systems
• Airlines
• Others
Aerospace Customers
Aerospace Activities in SA
• SA Defence
• Augusta Westland
• Eurocopter
• Spirit Aerospace
• SAAB
Deployment of Aero-mechanical Activities at CAV
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Capital Funding Requirements
The capital funding requirements for CAV is stated below:
MTEF Periods (2015/16 to 2017/18)(2018/19 to 2020/21) and two additional years
GBA
(m²)
GLA
(m²)
GLA
(%)Project Cost
Expense to
date Balance 2015/16 2016/17
2017/1
82018/19 2019/20 2020/21 2021/22 2022/23
Total
Cashflow
1 Landside Infrastructure (13.60ha) - - - 314 21 293 24 117 129 23 293
2 Landside Building including designs 50 888 44 781 88% 535 41 494 162 78 106 138 10 494
3 Airside Infrastructure (37.06ha) - - - 592 1 591 71 167 207 38 108 591
4 Airside Buildings including designs 88 778 84 339 95% 1 954 4 1 950 84 194 340 187 572 573 1 950
139 666 129 120 92%
R'm
Equity Funding Infrastructure ( the dti) 884
Equity Funding Building ( the dti) 444
Tenant Funding building 1 730
External Funding 275
3 333
Assumptions
The funding assumptions are based on 2012 calculations
Funding requirements excludes C-side and Hill-side
573 3 328
Source Funding
Total
350 458 530 516 305 572SUBTOTAL R' million 3 395 67 3 328 24
CENTURION AEROSPACE VILLAGECAPITAL FUNDING REQUIREMENTS
PHASE DEVELOPMENTS
AREA PROJECT COSTS (R'm) CASHFLOW REQUIREMENTS (R'm)
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CAV Landside
CAV C-Side
Landside X-tension
CAV Airside
Future Expansion?
CAV’s Development Areas
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The First CAV Building: ITC2
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The current tenant pipeline satisfies the requirement of filling the critical mass
The requisite timing for the delivery of turnkey operations are satisfied within the investment requirements
The first stage of development includes the following:
– African NDT
– Mini-factories’ Interest by smaller potential tenants
– Training and Incubation Facility
– AMD
– Permanent Exhibition Centre
– CSIR / Aerosud Manufacturing
– Aerosud Aviation
– Aero Services
– Electrothread
– Business & Conference Centre
Airside Interest:
– The SARA Project
– MRO Opportunities
– Aerosud extension
– National Airways Corporation (NAC):
Would re-locate building structures (from Lanseria and Grand Central Airports)
Potential Tenants
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Direct & Indirect Jobs: Socio-Economic Impact Assessment*
CAV and Tenant CAPEX and OPEX Direct jobs
Estimated total direct and indirect jobs
Impact on direct job creation at CAV and its tenants is illustrated to include:
Total CAV and tenant direct jobs in year 3 (2018/19) is expected to reach 2817 jobs, excluding the expected 335 construction jobs:
Tenant and CAV direct jobs are expected to reach 2764 jobs by 2018/19
Tenant and CAV Service Provider jobs are expected to reach a level of 53 by 2018/19
Impact on indirect job creation is illustrated with the application of a factor 7 as a multiplier:
The 2817 direct CAV and Tenant jobs, as well as the 335 construction jobs would generate some 22 000 indirect jobs in the broader economy by 2018/19
NOTE: * Based on Economic Impact Assessment of 2011
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Appointments: Technical Team Appointments:
Principal agent, engineers, quantity surveyor, architects
Specialist Team Appointments: Town planning, EIA, TIA, geo-technical survey, land survey
Procurement Process concluded for the following: Bulk Earthworks and Infrastructure (BEWI) ITC2 building
Legal processes: Head Lease Agreement between the dti and DPW
Powers of Attorney were issued by DPW Power of substitution was exercised for CEO to sign agreements with CoT Head Lease Agreement is being reviewed
Occupancy certification for ITC2 Building: Legal Opinion obtained CAV to approach CoT Building Inspectorate for Occupancy Certification Pending bulk service agreements and contributions paid to CoT Engagements with CoT Township establishment process underway
Compliance with CIDB Status: Legal opinion is being obtained CIDB grading for the appointed BEWI contractor is being investigated CIDB interaction is to follow legal opinion Status of contract with BEWI contractor is to be confirmed
Regularising lease agreement for first CAV tenant building
Legal Processes and Appointments
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Questions and Answers