GOVERNMENT PRINTING WORKS

PRESENTATION TO PORTFOLIO COMMITTEE

9 June 2009

GOVERNMENT PRINTING WORKS

Building a New Government Printing Works

STRATEGIC PLAN

AGENDA

1. Background

2. Key Priorities Going Forward

3. Progress with Conversion Process

4. Progress with Key Projects

5. New Facilities

6. Funding Requirements

7. Summary and Closing Remarks

The objective of our presentation is as follows...

Firstly, we would like to thank the Portfolio Committee for the opportunity and hope that we can give the Committee an insight into the progress and developments at GPW for the 2009/10 financial year and beyond

Provide insight into the key priorities going forward

Provide an update on the conversion processes to date

Provide the Portfolio Committee with a high level overview of the funding requirements going forward

Provide an overview of some of the achievements to date

The success of GPW is key to the turnaround of DHA and the sanctity of the State, as GPW is the mandated security printer

The background and discussions to date indicate whilst a lot has to be done, the sustainability of GPW still remains a challenge (1/2)

GPW was established in 1888 as the Government Printer but asset stripping has occurred over many years due to Governments lack of investment in the printing infrastructure

In 1976 GPW was established as a Trading Entity under DHA but has been unable to secure adequate revenues to capitalise and invest in modern facilities and equipment required of a state-of-the-art security printer

A business case was prepared and presented to NT and DPSA in May 2007 for conversion but NT and DPSA raised several issues and the business case was never finalised

GPW is key to the delivery of security printing to DHA (and other National Departments) and therefore the efficient, secure functioning of GPW is critical to RSA’s external image, performance and commitment to its Stakeholders

Whilst the conversion process received attention, the organisation was bleeding operationally and at the heart has been the loss of skills due to uncompetitive salaries, poor working conditions and restructuring fatigue

GPW facilities are not conducive to a “manufacturing” type environment and hence inefficient and costly production processes

There was no capital available initially for proper and modern facilities and equipment

The background and discussions to date indicate whilst a lot has to be done, the sustainability of GPW still remains a challenge (2/2)

The AG raised various qualifications issues and these have not been fully addressed

DHA charged public for printing of documents but funds flow to national fiscus and not GPW

“Profits” could not be retained for future investment in the assets and infrastructure of GPW – therefore resulted in asset stripping

Opportunities presented itself for printing services outside RSA but could not be maximised and capitalised on due to capacity and other constraints

Although some funds has been provided in the MTEF, GPW still requires additional government funding but this is inadequate to meet its capitalisation requirements and there is uncertainty on future allocations

GPW therefore ventured into other printing areas to remain viable but these are non-core to its mandate

There is no proper governance structure in place to guide and advise GPW and it’s Shareholders on the print environment, operations and best practices

DHA fully understands these issues and committed to implement a turnaround strategy that meets all stakeholder aspirations, while ensuring a logical and

phased process and sustainable GPW

Going forward, the GPW has set certain key priorities, including the conversion of the GPW into a GC (1/4)

Financial Management

• Accurate planning and forecasting

• Maintain optimal cash flows and working capital

• Manage financial risks

• Develop new financial system for print environment

• Reduce AG findings and qualifications

Cost Management

• Change/review the cost/product pricing system/strategy

• Reduction in wastage and spoilage

Operations Management

• Replacement of dated technology and machinery

• Optimisation of production capacity and efficiencies

• Achieve product/service excellence

Going forward, GPW has set certain key priorities, including the conversion of GPW into a GC (2/4)

ICT Management

• Master System Plan and ICT strategy

• Develop Disaster Recovery Plan

• Ensure compliance testing for all new initiatives

• Review and update policies

• Upgrade and integration of ICT systems for printing environment

Supply Chain Management

• Reduce Stock Levels

• Phase out slow moving items and redundant stocks

• Strategic supplier management

• Update and develop electronic suppliers database and order information

• Contract and SLA management


HR, Strategy and Transformation

• Develop and Implement Human Capital Strategy

• Policy Development and Strategy alignment

• Align HRM Practices and Strategies

• IPC in place

• Trained, skilled and service oriented staff in place

Security

• Security risk assessment

• New and updated physical, personnel, production and documentation security systems in place

• Introduce vetting system for key personnel


Internal Audit

• Development of internal audit and risk management plans

• Monitor compliance with PFMA and related regulations

Marketing

• Develop GPW Brand

• Local Customer Retention

• Local Business Development

• Develop an aggressive regional marketing strategy on face value documents

However, key to the above is the turnaround and conversion of GPW in the MTEF period

We have also made substantial progress with the conversion process despite delays and challenges, and a phased process is planned

A business case has been prepared in consultation with NT and DPSA and it was evaluated by a panel in September 2008, addressing the issues raised by NT and DPSA originally

We have consulted with the Minister, Deputy Minister, NIA, SAPS, GCIS and Labour and received full support for the process and model

A S36 (3) application has been approved by NT and has been implemented

An application was been made to the Minister (DHA) for delegations to the CEO and was granted

The Ministers of Finance and DPSA have concurred with the conversion to a Government Component and we are awaiting the signing of Notices and Presidential Minute by the President

The relevant Government and Establishment Notices has been prepared and will be gazetted once the President signs the Notices and Presidential Minute.

The financial delegations as required by the PFMA have been prepared

DHA has committed certain resources via the Turnaround Project to assist with the burning issues at GPW and an Acting CFO has been appointed to assist with the financial affairs at GPW

We therefore need to ensure that the notices are gazetted as soon as possible and that the key activities are implemented with speed

In addition GPW has also embarked on certain key projects, the new passport processes being one of them and the status is as follows

The equipment has been delivered and commissioned.

Employees have been trained on the passport machine

The equipment was installed at the new facilities at the “Old Mint”, which was refurbished and the site was finally handed over during April 2009

The new South African passport was launched on the 8th April 2009 and production commenced the following week

A total capital investment of R307m has been paid to date towards the new passport facility

The above equipment will be the first in a series of upgrades to modernise and ensure a secure print environment

We have also identified the future “home” of GPW and negotiations are in progress to expedite this matter

We had originally envisaged building a brand new facility at R700m (2005 prices) but the new facilities can be done at a substantially lower price

The new site will be the “Old Mint” and we are finalising the plans and handover of this site to GPW

The costs thus far were funded by DPW, but GPW will be funding some of the future expenses

GPW will enter into a concession of 20-30 years dependent on building costs funded by DPW and the monthly rentals

The building development should commence in 2009/10 financial year and be ready for completion on 2010/11

The additional lease costs to GPW will be R3-4m per month

The new facilities will be key to improvement in the production environment and production processes and should also boost employee morale and productivity

Finally, the transformation and modernisation will require additional capital injection by the State to ensure conversion and success of GPW

DETAILS 2009/10R 000’s

2010/11R 000’s

Asset Replacement - Machinery 190 521 69 216

New IT System 75 000 0

Transformation/Conversion Costs 56 800 93 661

This excludes the cost of the new facility

The Income estimates can be summarised as follows:

Statement of Financial

Performance (R million)

Audited Outcome 2005/06



Unaudited Estimate 2008/09

Medium-Term

Estimate 2009/10

Medium-Term

Estimate 2010/11

Medium-Term

Estimate 2011/12

Revenue 466.2 482.4 470.0 571.7 605.5 658.5 717.1

Transfers Received

0.2 0.2 110.2 137.4 331.2 93.0 123.3

The Expenditure estimates can be summarised as follows:

Statement of Financial

Performance (R million)




Unaudited Estimate 2008/09

Medium-Term

Estimate 2009/10

Medium-Term

Estimate 2010/11

Medium-Term

Estimate 2011/12

Employee Benefits

61.2 78.9 80.2 82.9 165.5 172.3 180.9

Administrative Expenditure

23.9 16.2 27.6 27.4 34.9 35.7 37.5

Production & Stores

13.3 20.6 36.4 55.8 25.6 55.2 94.0

Equipment 0.8 0.9 1.1 1.5 1.7 1.8 1.9

Professional Services

17.1 14.9 18.4 28.4 21.1 15.5 16.3

Sundry Expenditure

4.5 1.0 1.8 49.0 1.3 1.4 1.5

There are challenges ahead but hope that this presentation highlights the support/resources required from Government at this critical juncture We urge you to please provide us with the necessary advise and support during the

transformation process

Critically evaluate our plans going forward

Support us by ensuring that the requisite funds are forthcoming, as this is always key to any turnaround initiative

WE THANK YOU KINDLY!

Documents

GOVERNMENT PRINTING WORKS