Reimagining the SA Naval Dcockyard

Modalities for success

A working paper

“It is self-evident that the starting point for a successful state is the enactment of good policies. Good policies
alone, however, are not enough to achieve a successful state. In the absence of a competent state, good policies
don’t achieve their objectives.”

Mc Kinsey & Co. –Reimagining South Africa

Contents page
Introduction

Problem statement

The National Agenda and a roadmap for transformation

The role of patriotic business

The approach

Modalities for success and the zero sum game

-Modality one: metastasis

-Modality two: glorified labour broker

-Modality three: enhanced value offering

Recommendations on way forward

Conclusion
Introduction

In her Budget Vote delivered on the 19th May 2015, the Honourable Minister of Defence
and Military Veterans Nosiviwe Mapisa-Nqakula emphatically stated that ‘Building the SA
Navy remains a priority, with a view to protecting our maritime economy in order to
advance our development objectives.’ She further emphasized the fact that ‘A decision
was taken last year to return the dockyard to the Defence Force, due to Armscor’s
inability to manage this capability.’ Together, these two statements clearly address the
repositioning of the SA Navy and the Naval Dockyard in terms of its recapacitation to
deliver on the national agenda as envisioned in the National Development Plan (NDP),
the New Growth Path and the IPAP. This overarching vision is further elaborated upon
in the Defence Review 2014, and given expression to in the Defence Review
Overarching Implementation Framework.

This working paper was written to reflect upon and analyse the impact of the Naval
Dockyard Maintenance Contract (formerly known as the platform contract) on the
stated objectives of the SA Navy. As probably the largest current intervention in
financial terms of its kind and one with the most strategic value in repositioning and
reimagining the SA Navy it was fitting to look at modalities for success or the
consequences of a zero-sum game.

Problem Statement

The Naval Dockyard has for years been experiencing attrition in terms of resourcing,
de-industrialisation, lack of investment in human resources and personnel and loss of
strategic capability to fulfill fundamental tasks of a naval dockyard. One of the most
problematic lossess has been that of qualified and experienced engineering staff that
either leave the Naval Dockyard and open businesses that contract with the SA Navy or
they join large mainly white or foreign owned companies positioning for work with the
SA Navy and Naval Dockyard. This as a consequence has left the transformation of the
SA Navy hamstrung and entrenched working relations with untransformed companies
that add very little value other than commercial based. It is such unpatriotic enterprise
that fleece the SA Navy in pricing whilst offering very little if any value add. This is the
exact antithesis of what Gloria Serobe in the recent Mc Kinsey study ‘Reimagining South
Africa alluded to when she said: ‘Apartheid was a complex and sophisticated system for
excluding blacks from any meaningful participation in the economy. It was executed
with precision, with attention to the smallest details, and with all the intellectual
capacity at the disposal of those in charge.

Dismantling it requires exactly the same properties—and the business community must
play its part. In the years ahead, we should see business stepping up with innovative
solutions rather than waiting for government to impose policies such as black economic
empowerment or, worse still, being caught out in scandals of collusion, as have been
seen in the construction sector and even the bread industry.’

The National Agenda and a roadmap for transformation

Over and above the strategic direction outlined by the Minister of Defence and Military
Veterans, The National Development Plan (NDP) is a visionary roadmap for which we
have outlined milestones towards the full achievement of its goals. Each planning
period, infrastructure roll-out, investment and intervention takes us step-by-step closer
to the end state. Our suggestions in this contributory submission toward the
implementation of a Strategy for the Reindustrialization of the South African Naval
Dockyard must be viewed in the same spirit. Every single opportunity must be
leveraged to incrementally shift the SAN and Naval Dockyard closer towards its stated
goal as outlined in the vision of the Department of Defence and the national agenda as
outlined in the NDP to finally actualize the truism that ‘the destination is the point of
departure’.
The role of patriotic business (extracted from mc Kinsey Reimaging South Africa, 2015)

‘We won’t build the greatest nation on earth by being clever and demanding or by
emphasizing our entitlement to this or to that. Rather, we will do it the old-fashioned
way: through hard work, by creating and producing goods and services that the world
wants. Business must play a core role, because net jobs are created by small and
medium enterprises. Yet business today is sitting on hundreds of billions of rand that it
could invest but does not—because we have not given it a stable environment with
regulatory certainty that encourages foreign direct investment.

‘We also need to employ the rules and skills of business to create a winning state.’…
‘We also need to include a much greater proportion of South Africa’s people as active
participants in economic activity and growth. Of the 51 million South Africans, 5 million
are responsible for roughly 80 percent of our revenues paid to the South African
Revenue Services. We have 16 million people on some sort of social-security program—
roughly equivalent to the number of individual taxpayers.

Getting execution right

The National Development Plan is an economic blueprint that all of us can put our
shoulders behind. To be frank, though, this is probably the sixth economic document
we have put together in 20 years—we are very good at coming up with plan after plan,
policy after policy, but so far we have fallen woefully short on the execution. If we get
execution right this time, we can grow our economy by the requisite 5.4 percent per
annum so that we can absorb the 150,000 young people who enter the job market each
year. We might even succeed at growing at 7 percent a year and begin to match the
growth of some of our neighbors.

What will it take to achieve this? Resources are not the issue, because we have them in
abundance. Rather, South Africa will rise or fall on our ability to manage—that for me is
absolutely number one.
Avoiding zero-sum games

It therefore goes without saying that major interventions cannot translate into zero-sum
games but must clearly demonstrate its approach and how it adds value and
contributes towards achieving the stated strategic goals of the SA Navy

The approach

The most strategic approach towards supporting the stated transformation goals of the
SA Navy and the Naval Dockyard would entail incorporating the following strategic
imperatives:

i. A modern approach to reindustrialization of naval dockyards;

ii. Understanding the South African and SAN Dockyard legacy
iii. Interventions rooted in the present reality and challenges
iv. Embracing solutions that provide a compelling vision of the destination

In approaching the challenge of reindustrialization of the naval dockyard we must be

able to articulate the following key elements:

 a fully functional fleet that is capable of fulfilling the requirements of peace

keeping, joint naval exercises and protecting SA’s strategic and economic
interests along its coastline;
 leveraging the maintenance and technical upkeep solutions programme to
ensure achievement of socio-economic transformation and the dictates of
genuine empowerment.
 Creating an enabling environment for human capital development and skills
transfer
Modalities for success and the zero-sum game

The current process throws up three distinct modalities that have the potential to
present the following outcomes:

i. Entrenching the status quo

ii. Further attrition of the SA Navy and Naval Dockyard capacity and capability

iii. An enhanced value offering

Modality one: metastasis

The SA Navy has taken over the management of the Naval Dockyard. It is however
locked into old and untransformed patterns that is lecherous in its support of white
crony business mainly ex-SADF personnel that have invested in their own naval
engineering related start-ups and have a quasi-preferred status in its business
relationship with the SA Navy. This is best demonstrated by the manner in which the
incumbent level four upkeep solutions and maintenance contractor has been starved of
work despite a R136 million contract over the past two years.

Modality two: glorified labour broker

Probably the worst case scenario for the SA Navy is having made the right call in terms
of taking over the management of the Naval Dockyard to end up with an operator that
brings no value add neither in its patriotic spirit nor in its approach to transformation
but instead contributes to the further attrition of the SA Navy and Naval Dockyard
capacity and capability through being a glorified labour broker. Like modality one the
enterprise is replete with ex-SADF engineering personnel that have been pilfered from
 the navy to bolster the procurement potential of old established and untransformed
relations that care little for the recapacitation of the SA Navy or its strategic goals. Such
an operator may even resort to complying with the bare minimum in terms of B-BBEE
compliance yet would have no qualms in fronting as its major modus operandi as its
interest is purely commercially driven and has characterized much of South African
enterprise post 1994.

Modality three: enhanced value offering

Whilst the Naval Dockyard Maintenance Contract merely calls for a technical partner the
translation of that requirement into an enhanced offering must of necessity speak to:

i. The strategic intent of Defence Review 2014 and the implementation

framework

ii. The repositioning and reimagining of the SA Navy and Naval Dockyard

iii. A full strategy for reindustrialization

iv. A patriotic approach to doing business with the state

Such an approach would of necessity incorporate the following:

I. Culture change
II. Infrastructure enhancement and investment
III. Human Capital Development and Skills Transfer
IV. ISO Quality standards
V. Global best practice in project and programme management
VI. The imperatives of empowerment and transformation
VII. Value add approach
VIII. Commitment to world class technical proficiency
Recommendation

It is in the strategic interests of the DoD, SA Navy and the Naval Dockyard to reach an
outcome out of the Naval Dockyard Maintenance Contract procurement process that
realizes the desired strategic objectives and a value added approach and offering. The
resources to effect such a process are hard to come by and failure to do so will set back
strategic planning and its related goals to the next MTEF cycle post 2019. This in not a
desirable outcome for the country, SADC and the AU and is at odds with the visionary
call by Minister Mapisa Nqcakula in her Budget Vote 2015.

The options facing the SA Navy in view of the status quo is :

i. to ensure the desired outcome

ii. to halt the award process and re-advertise afresh should it not deliver the
desired outcome

iii. to persist with the current level four maintenance contract on an extended
basis as a means of realizing the stated goals

Conclusion

The status quo requires that the current evaluation system be assessed against
standard practice in the SA Navy in an effort to ensure that there is legal compliance,
that the process is beyond reproach, that the process doesn’t pose any risk to the SA
Navy and e it to legal challenge and that the process is indeed correctly weighted in
favour of delivery on the strategic intent of the country, DoD and the SA Navy.

In the words of the Honourable Minister of Defence: ‘ Our Defence Force has a critical
role to play as we, together with our regional and other partners, seek to secure peace
and stability, without which economic development is not possible. The Defence Force
is too valuable a national asset to be a subject of partisan political bickering, and it is
therefore important for us to seek a national consensus on our defence policy, as was
urged by the 1998 Defence Review. This is the attitude and spirit that must guide us as
patriots in our mission to build a highly professional and disciplined Defence Force,
sufficiently resilient and resourced, to protect both our country and our constitutional
democracy.