Armscor chief executive, Kevin Wakeford, maintains the defence and security acquisition agency’s turnaround process is well-defined and it will be “a streamlined, rejuvenated and refocused organisation that is financially viable and self-sustainable”.
The planning and transformation phase of the turnaround finishes this month (March) and he sees the focus now moving to implementation of recommendations, devolution of power, putting in place a new structure, migration and upskilling of people where necessary, “focusing on the generation of revenue, cost saving and a new culture of doing things,” he writes in the Armscor newsletter.
“We are an institution that can make a difference. Our company and our continent have tremendous opportunities moving forward. There is no doubt we can make a significant contribution to the country. This only requires a renewal of mind and a renewal of heart.”
On the issue of self-sufficiency, the Armscor 2015/16 annual report notes a surplus of just over R200 million was generated compared to R84 million in the previous financial year. Armscor’s government grant for 2015/16 was R858.7 million.
According to National Treasury’s Estimates of National Expenditure (ENE) for the 2017/18 financial term, Armscor’s main source of revenue is a transfer from the Department of Defence constituting 70% of its revenue over the medium term. Transfer payments increase at a rate of 12.2% (R431 million) over the medium term.
The ENEs note Armscor “plans over the medium term to increase the income earned from the commercialisation of intellectual property, as a way to increase revenue. This will be done through ensuring that at least 10 per cent of royalties from intellectual property-related technologies are provisioned for the corporation in the finalised contracts. The corporation also generates revenue through the sale of goods and services and from interest earned from financial institutions. These funds are used to finance its operations, administrative expenses, training, maintenance of buildings, and other goods and services”.
The Armscor turnaround will be implemented by way of a one, five and 10 year model with the basic structure expected to be in place after the first year.
As far as structural changes are concerned Wakeford, who was appointed chief executive in May 2015, said these would include “new, enabling areas of business; asset sweating; government to government business and business assurance in terms of compliance, quality assurance and risk management”.
“Acquisition remains our core business but we are looking at centralising supply chain management in support of other areas in Armscor in a more efficient way.
“Supply chain management speaks to intelligent procurement and is part of every modern business. We have a massive reservoir of knowledge and a vast source of information at Armscor. The newly established interim sustainability unit, spearheading business development, will be adequately resourced to support the work we do.
“Our turnaround is about building partnerships in the defence sector and beyond. Building relationship with state-owned enterprises (SOEs) is vital. There are many opportunities for government departments and parastatals to collaborate more closely.
“We want to go beyond our existing relationships,” the chief executive, now almost two years in office, writes, “and work together more productively and efficiently with existing and potential partners. Some parastatals in the transport and economic cluster already have relationships across Africa. We can leverage off each other’s strengths to open up new logistic pathways into Africa”.