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Over R56 million spent on Armscor turnaround strategy

Armscor turnaround strategyArmscor has undergone much needed introspection with an in-depth turnaround project and is confident it can now stand up and be counted and earn revenue even with no increase in defence spending likely for the foreseeable future.

Kevin Wakeford has been in the chief executive’s hot seat for 28 months and was one of the leading proponents for the state-owned defence and security acquisition agency to turn itself around. Another was Armscor board chairman, retired SA Navy chief, Johannes Mudimu, who has driven the “in time and on time” mantra for Armscor since his appointment by Defence and Military Veterans Minister Nosiviwe Mapisa-Nqakula.

It has taken a year for the R56.2 million turnaround to reach a point where the challenges of operational efficiency and sustainability can be overcome via five strategic initiatives.

The money spent on the turnaround project will, according to Armscor Senior Manager: Operational Transformation Tsholo Moleko, be offset by what she terms “potential revenue opportunities”.

“The turnaround project identified R70.1 million in potential revenue generating opportunities which are currently being implemented,” she told defenceWeb in an exclusive briefing.

Another major reason for the turnaround project, awarded to FeverTree Consulting as a deliverables based contract, is Armscor cannot expect to survive on what it receives from the defence and security sectors of government.

Wakeford is adamant: “The SA National Defence Force (SANDF) will remain our number one client, but Armscor has the requisite skills to become the complex acquisition agency for government and to grow”.

He points out many engineers in Armscor’s thousand-plus workforce are trained to operate in a number of disciplines. This, he maintains, puts Armscor in a vantage position where it can become a smart buyer through performing complex acquisition services for and collaboration with the security cluster, various government departments and other state entities, such as Transnet, CSIR, Denel and others. In line with the strategy, Armscor is expanding its services to allied African countries, BRICS and other global players.

Further steps to becoming a fully-fledged government acquisition agency “are on the horizon”.

With the budget-constrained SANDF not offering work in volumes to materially boost income, Wakeford wants to see Armscor become more involved in South Africa’s massive private security sector. He sees no reason why this sector, said to employ close to two million people in various capacities through more than nine thousand registered companies, should each go their own way when it comes to, for example, firearms and radios.

“Armscor would be able to leverage its buying capability, maximizing economies of scale for the purchasing of personal weapons for the nine thousand companies rather than each company going to the same manufacturer. With this in mind, the objective of maximising localisation versus expensive imports will be achieved,” he pointed out.

All told the Armscor turnaround was broken down into seven key themes, each with its own workstream. “At every stage of the project Armscor management worked with senior representatives from the consultants to ensure the best interests of Armscor were always put first,” Moleko said.

This saw many thousands of hours devoted to, among others, developing revenue driven strategies, broadening and improving core Armscor functions, driving and improving efficiencies and a new governance model for “a new Armscor”. This to ensure expedited decision making and improved turnaround times.

Examples of driving revenue generation opportunities include leveraging Armscor’s Gerotek vehicle testing facility west of Pretoria and prioritising the agency’s disposal of defence equipment section. Revenue from Armscor-owned properties included in the overall property portfolio is projected to rise to the R760 million a year mark from a potential R8.6 billion rand portfolio.

“Call it leverage or sweating but Armscor is going to use its assets to become sustainable,” Wakeford said.

Armscor will also be taking the “in time, on time” mantra further when it comes to delivering on SANDF and other government security needs.

“If it’s got a part number, there’s no need for it to become tied up in the same system as, for example, the new SA Army infantry fighting vehicle. So it goes though speedily and arrives where it is needed quickly,” Moleko explained.

This streamlining will be taken further with clear single person accountability to speed up decision making and consolidation of functions to add to efficiency.

Wakeford is certain the turnaround strategy is the culmination of Armscor’s different thinking en route to becoming resourceful in the way it does business.
 
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