Chairperson and hon members, it is my privilege on behalf of the Portfolio Committee on Public Enterprises to introduce this report to the House for consideration and adoption. Our committee undertook an oversight visit to Denel on 24 June 2011. The purpose of the visit was to familiarise the committee with the challenges facing Denel SAAB Aerostructures, DSA, which is one of the business units in the Denel Group.
The committee learnt that DSA has been operating in an uncertain and unstable business environment which is filled with complexities. The environment requires DSA to remain competent and competitive in the industry.
The committee furthermore observed some strengths of DSA, amongst others, firstly, the ability to develop and certify complex metallic and composite structures for the international and commercial markets and, secondly, the development of highly skilled professions and advanced manufacturing capabilities.
DSA plays a leading role in the aerostructures industry in South Africa in regard to world-class design and manufacturing, and produces highly skilled graduates in engineering. On the continent and globally it continues to be the powerhouse for ability, opportunity and innovation in the aerospace industry. Locally, it plays a critical role in the promotion of local manufacturing and local skills through broad-based black economic empowerment.
At the same time, however, DSA has recorded significant financial losses over the past five years for a number of reasons, of which two are the delay and development cost overrun of the Airbus A400M transport aircraft programme, and the suboptimal pricing of the A400M work packages. In addition, in terms of the shareholders agreement between SAAB and Denel, SAAB exercised its option in March 2011 and exited Denel SAAB Aerostructures.
Going forward, DSA has embarked on a fundamental restructuring process to improve its financial and delivery performance, including: a net loss improvement; cash utilisation improvement; a reduced workforce; a reduced rental footprint; improvement in the operational environment; negotiation on the Airbus A400M work packages to secure market-related recurring cost prices; importantly, a drive to secure new orders; and, lastly, a focus on skills development and retention.
During the visit to DSA, the portfolio committee also visited the Denel Training Academy, DTA, where we learnt about the training methodology, inspected the facility, interacted with the students and were briefed about the challenges facing DTA. Since our visit in June, Denel has provided our portfolio committee with a DSA restructuring progress report on the DSA turnaround status, the status of their negotiations with Airbus on the A400M, and the status of its funding.
In conclusion, the portfolio committee regards the oversight visit to DSA as successful. There we learnt first-hand about the challenges facing DSA within its own facility and organisation. Going forward, the committee will monitor the progress made by DSA on its restructuring plan; interact with the Department of Public Enterprises on the end state of Denel; conduct a meeting with the Portfolio Committee on Defence and Military Veterans regarding orders by the Department of Defence and Military Veterans from Denel; and receive an update on the defence acquisition strategy.
Chairperson, I hereby submit this report on the oversight visit to Denel SAAB Aerostructures to the House for consideration and adoption. I thank you.
There was no debate.