THE NATIONAL INDUSTRIALPARTICIPATION PROGRAMME

PRESENTATION TO PORTFOLIO COMMITTTEE ON TRADE AND INDUSTRY

October 2005

Background

• Became obligatory to all government purchases in September 1996.

• Obligations monitored in the region of US$15 bn

• Main obligations arise out of purchases from the SDP and SAA.

• Other obligations from telecoms, IT transport and energy sectors.

2

Main purpose

• To raise investment levels

• and to increase international market access for South African value-added goods and services

• by leveraging off government procurement.

3

The NIP Obligation

• Seven years to fulfill the obligation

• Credits system used for monitoring purposes

• Performance guarantee required

• Responsibility lies solely with seller

• Purchasing decision independent of NIP

• NIP is a precondition but not a factor in the adjudication process

4

Current Obligations

• Total Obligations approx US$15bn• US$13 bn arising out of Strategic

Defence Procurement• US$800m arising out of purchases by

SAA • Other purchases arising from Telkom,

Eskom, Transnet, national and provincial departments

5

New Obligations

• Increased activity will result in substantial increase in non-defence obligations

• Energy Infrastructure– De-mothballing programme– New power stations

• Transport Infrastructure– Gautrain– Spoornet programme

• PBMR programme• World Cup 20106

Current Obligations• Obligors have seven years to fulfill

obligation– BAE/SAAB has 11 due to size

(US$7.2bn)• Defence obligors have specific

milestones that must be met– First milestones due in 2004 – Second milestones due in 2005– Next milestones due in 2007 for

BAE/SAAB – Finalising April 2005 milestone for

Thyssen, Agusta and Thales

7

Aggregate Performance

Investment Sales

Total Milestone 1 339 114 030 2 799 649 995

Performance 1 531 400 087 2 284 069 448

Percentage 114% 82%

Aggregate Performance

9

% Performance

114.4%

81.6%92.2%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

Investment Sales Total

Performance of Obligors

• Since inception over 130 projects approved and implemented

• Projects in various sectors and different regions

• These projects have generated– Investment Credits in excess of

US$1bn– Exports and Local Sales Credits of

US$2.5bn• Includes technology transfer, BEE

and SME promotion– 8 000 direct jobs

10

Performance of defence obligors per milestones

• BAE/SAAB in aggregate almost achieved their first milestone target– Achieved more than 100% investment target– 95% overall achievement

• Agusta – Exceeded its first milestone targets – Currently at 68% of its second milestone due in

2005• Thales

– Achieved 100% of its investment target – Overall achievement of 93%

• Ferrostaal– Expected to achieved 82% of its milestone by

end of 2005• Thyssen

– Achieved 65% of its milestone due in April 2005

11

BAE/SAAB Selected Projects

• Treacle Fund2 – targeting export based industries• Gold Advance Scheme – to stimulate jewellery

manufacturing in South Africa• Carbon Manufacturing – activated carbon for liquid

and gas filtration• Belmec High Pressure Die Casting – manufacture of

automotive components• Ferrochrome Smelter – new ferrochrome smeltering

facilities.

Milestone Performance BAE / SAAB

BAE / SAAB NIP Credits by year

-

500.00

1,000.00

1,500.00

2,000.00

2,500.00M

illio

ns

year

Cre

dits

US

$

Thyssen Selected Projects

• Ferrochrome Smelter

• Aluminium Tubes – manufacture of radiators

• Dispack – packaging, plant services, technical and logistics

Milestone Performance Thyssen

GFC NIP Credits by year

-

50.00

100.00

150.00

200.00

250.00

Mill

ion

s

year

Cre

dit

s U

S$

Ferrostaal Selected Projects

• MAN Turbo Projects – Production of turbine blades• Magwa Tea Estate – Tea plantation in Lusikisiki• Hosaf PET Recycling Plant – Recycling of plastic

bottles to produce polyesters• Atlantis Training Centre – training and further

qualifications in a range of industrial, technical and other skills

• Engineering Services – supply and implementation of industrial plants worldwide

Milestone Performance Ferrostaal

GSC NIP Credits by year

-100.00200.00300.00400.00500.00600.00700.00

Mill

ion

s

year

Cre

dits

US

$

Thales Selected Projects

• Blackstone Tek – Production of carbon fibre products

• Silicon Smelters and Fume Dioxide – Production of silicon metal and silicon fume dioxide

• Tenesa – Manufacturing of solar panels• Evertrade Medical Waste – Facilities for processing

and management of waste

Milestone Performance - Thales

THALES NIP CREDITS BY YEAR

-

100,000,000.00

200,000,000.00

300,000,000.00

400,000,000.00

500,000,000.00

1 2 3 4 5

Years

Cred

its (U

S$)

Agusta Selected Projects

• Filk Gold Chains – Manufacture of gold chains

• Cape Mohair – Spinning and dyeing for exports

• Mario Levi – Split leather production for motor vehicles

Milestone Performance Agusta

AUGUSTA NIP CREDITS BY YEAR

0

50000000

100000000

150000000

200000000

250000000

1 2 3 4 5

YEAR

cRED

ITS

(US$

)

Performance of Non-Defence Obligors

• Boeing has fulfilled its obligations three years ahead of schedule

• Airbus has achieved 20% of its obligation due in 2013– 30% achievement if SAA does not go

ahead with the purchase of the A320’s• All other non-defence obligors performing

satisfactory– Siemens, Alcatel, Alstom and Ericsson

with credits above current obligations22

23