Centurion Aerospace Village CAV CAV Presentation Portfolio Committee

Centurion Aerospace Village (CAV) CAV Presentation: Portfolio Committee on Trade and Industry CAV CEO 03 November 2015 Page 1

What is the CAV? (Centurion Aerospace Village) v Inter-governmental Opportunities: § An “Initiative” of the Department of Trade and Industry (the dti) ( § A GPG Industrial development § v v v opportunity “Special Project Status” with Co. T v Land made available by the Department of Public Works (DPW) through the dti for 99 years effective as of 2009 v Adjacent to Waterkloof Air Force Base in Centurion v Current Development Phases§ Landside Development 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 ü v For tenants who do not require runway access-13. 6 Ha Proposed Future Development Phases§ Airside Development ü Tenants who require runway access§ 36 Ha Lay claim to other property ü For future tenant and user requirements v Green Design v Optimised shared services’ environment and unique value proposition in a world-class establishment Page 3

The Turnaround Plan v A Forensic Audit was conducted of the Centurion Aerospace Village (the CAV): - v 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 v 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 Page 4

Desired End State u 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: Ø Ø Ø Ø 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 Ø Stimulating technical competence and R & D Ø Providing opportunity for New Entrants to the Industry Page 5

Strategic Objectives 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, 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 socioeconomic 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 Page 6

Governance Structure Minister of Trade and Industry Executive Authority CAV Board of Directors Accounting Authority Audit & Risk Committee Human Resources & Remuneration Committee Nomination & Governance Committee Governance Sub-Committees Page 7

Key Challenges and Mitigation 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 Page 8

Financial Stability Considerations Pillars For Achieving Financial Sustainability Essential Requirements Strategic and Financial Planning Business Plan CAPEX Income Diversification Investment of Time and Money Sound Administration And Finance Own Income Generation Strategic Profit Improvement Steps To Implement • • 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 • 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) Long-term • Enforce strict debtors policy, cost reduction & tax efficiency Commitment • Ensure cashflow positive situation • Ensure compliance to PFMA, Treasury regulations and business control (M&E) Effective • Drive an expanded mandate (Industrial Policy, etc), Involvement in Leadership & Provincial plans. Management Team • Seek shareholder to cover full overhead budget • Seek partnerships that provide in-kind and financial support (leverage) Page 9 Team Work • Enforce performance based reward & Business Balanced Scorecard

Past, Present and Future u CAV is embarking on a Journey from an uncertain past into a sparkling future What happened? : q PFMA Listing Process q Business Case and Bill was developed q Landside BEWI contractor appointed q ITC 2 building Completed q Record of Decision obtained q Township Establishment q MOI prepared q Governmental Interaction (IGR) q Air Force interaction q Establish CAV Business and Organisation Structure CAV: The Future is Bright CAV: The Current programme CAV: The Past Eighteen Months What is happening? : q CEO appointment complete q Finalise Business Case q Conclude PFMA Listing q Maintain BEWI contract q Conclude Township q q q 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? : q Obtain Funding q Implement Business Case q Explore options for q q q q q institutionalisation Government IGR Rejuvenate the BEWI contract Establish the Township Conclude the Landside Phase 1 a BEWI works Obtain occupancy certificate for ITC 2 Build and maintain relationship with stakeholders Explore and obtain PPP Roll-out CAV Structure Manage revenue streams Page 10

CAV Achievements u u 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: ITC 2 o Non-destructive testing and standards: o African NDT o Electronic harnessing: o Footprint layout: o For various interested parties o Denel Aviation u Basic general layout: o Land Airside o As per area plan submitted for township establishment purposes, including: o o o Tooling: o Quad o o u Amphenol Contactserve u Architectural views: o Per interested party o In anticipation of future needs o FAR requirements Bulk Earthworks Infrastructure Utility Service requirements EIA TIA Geo-Technical processes Page 11

Sector Development Plan (SDP) Technology Streams 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 aerospace. The 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) Page 13

Aerospace Industry Supply Chain Overview Sub-contract work to lower tiers Tier 3 Supplier Tier 2 Supplier Tier 1 Supplier Order placed by an Airline to an OEM Airlines Value adding products supplied to higher tier Completed aircraft Supplied to Customer Core Competencies Inside South Africa Manufacturing Activities Outside South Africa Page 14

Deployment of Aero-mechanical Activities at CAV Aerospace Customers • Airbus • Boeing • BAE Systems • SAAB • SA Defence CAV Shared Services • ICT • Security • Logistics • Warehousing • Packaging • Transportation • Customs • Facilities Management Tier 2 • Conference • Cleaning • Maintenance • Waste Management • Landscaping • Cafeteria • Others Tier 3 OEM Denel Aerosud Tier 1 Tier 2 Tier 3 Tier 4 down • Augusta Westland • Eurocopter • Spirit Aerospace • Airlines • Others Aerospace Activities in SA • 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 Tier 3 • Small Parts supply • Paint Supply • Bolts, screws, washers • Engineering Services Page 15

Capital Funding Requirements v The capital funding requirements for CAV is stated below: Ø MTEF Periods (2015/16 to 2017/18)(2018/19 to 2020/21) and two additional years Page 17

CAV’s Development Areas Landside X-tension CAV Landside CAV Airside Future Expansion? CAV C-Side Page 19

The First CAV Building: ITC 2 Page 20

Potential Tenants u u u The current tenant pipeline satisfies the u Airside Interest: requirement of filling the critical mass – The SARA Project The requisite timing for the delivery of – MRO Opportunities turnkey operations are satisfied within – Aerosud extension the investment requirements – National Airways Corporation The first stage of development includes (NAC): the following: u Would re-locate building – African NDT structures (from Lanseria and – Mini-factories’ Interest by smaller Grand Central Airports) potential tenants – – – – Training and Incubation Facility AMD Permanent Exhibition Centre CSIR / Aerosud Manufacturing Aerosud Aviation Aero Services Electrothread Business & Conference Centre Page 22

Direct & Indirect Jobs: Socio. Economic Impact Assessment* v v 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 CAV and Tenant CAPEX and OPEX Direct jobs Estimated total direct and indirect jobs Page 24 NOTE: * Based on Economic Impact Assessment of 2011

Legal Processes and Appointments v 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) § ITC 2 building v 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 Co. T § Head Lease Agreement is being reviewed § § v Occupancy certification for ITC 2 Building: § § § Legal Opinion obtained CAV to approach Co. T Building Inspectorate for Occupancy Certification Pending bulk service agreements and contributions paid to Co. T Engagements with Co. T Township establishment process underway § § 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 Compliance with CIDB Status: Regularising lease agreement for first CAV tenant building Page 26

Questions and Answers Page 27