Rheinmetall Denel Munition RF (Pty) Ltd

© Rheinmetall Denel Munition | Cape Town | November 2020

Presentation to the Select Committee on Public Enterprises and CommunicationRheinmetall Denel Munition RF (Pty) Ltd

Cape Town I 18 November 2020

© Rheinmetall Denel Munition | Cape Town | November 2020 2

Presentation to the Select Committee on Public Enterprises and Communication on 18 November 2020

RDM’s ShareholdersStrong Strategic Partnership

49% 51%

RDM

“Product of South Africa” with 100% local productionA Strong Strategic Partnership with Germany

RDM as the SANDF ammunition supplier provides sovereign defence capability RDM as a local manufacturer, keeping funds and jobs in South Africa RDM is a significant part of Denel’s product portfolio – providing integral sub-systems to Denel Dynamics & Land Systems RDM is part of Rheinmetall’s International Sales Network with more than 140 sites worldwide Local design and development generating export earnings to establish new technologies in South Africa


RDM’s Business Situation10 Years of Success story based on Exports

3

2011 2012 2013 2014 20162015 2017 2018 20202010

48% 77% 65% 70% 81%75%Export Quota

82% 84% 90%59%

2019

84%

On

ly w

ith

Exp

ort

to

Mid

dle

Eas

t

> 100 m ZAR Skill Development

Levies

1.5 bn ZARTechnology and Product

Development

> 200 m ZAR Training and

Bursaries

> 400 m ZAR Third-Party Income Tax

> 1.0 bn ZAR Infrastructure

Investment

Sales

Investment and Contributions in South Africa



Plant Engineering / Industry Enabling

RDM’s Product PortfolioWorld Leader in Ammunition Based on Explosives Material

4

Air-LaunchedDirect Fire Infantry Indirect Fire

105 / 155mm Artillery

60 / 81 / 120mm Mortar

76mm Naval

105mm Tank

40mm | Pyrotechnic | Minefield Breaching

MK80 series warheads

Rocket-Motors & Missile Warheads

Energetic Materials

Explosives, Propellants and Pyrotechnics



RDM at the forefront of the Artillery SupercycleWorldwide Growth in RDM Core Products

Missile Technologywith Denel

RDM‘s Product Portfolio and Technology Roadmap meets the International Market‘s Requirements

RDM is a globally competitive and integrated South African Defence Industry company that supports the national interest of South Africa

Support the national and development transformation agenda

Develop and invest in strategic South African science, engineering and technology skills, capabilities and direct and indirect job creation

RDM answering the growing market needLong Range Artillery solutions



Regular compliance audits and inspections

In-house Safety team that is focused on ensuring RDM remains compliant

Internal & 3rd party audits and validation of compliance levels

Legislated annual compliance audits/validation of compliance

Occupational Health & Safety Act

Explosives Act

National Railway Safety Regulator Act

Hazardous Substances Act

National Health Act

Major Hazardous Installations Act

Community Fire Safety (By-law 11257 of 1998)

National Veld and Forest Fire Act

National Environmental Management Act

NEM-Waste Act

NEM-Air Quality Act

National Disaster Act

Explosive Building Licences Explosives Transport Permits Radiation Control licence Railway Safety Permit Clinic Registrations Authorisation to service fire extinguishers Flammable Substances Certificates LPG Installation-Certificate of Compliance Major Hazardous Installation (MHI) registration Atmospheric Emission Licence (AEL) Water Use Licence (WUL) Waste Licences COVID Procedures

RDM Compliance Licenses and PermitsSouth African Legislation Governance

RDM’s business based on……a Strictly Regulated Explosives Environment



• Clear and open line of communication with DEL (Explosives division)

• Any building &/or process changes done under approval of DEL

• DEL is approving authority of building licenses

• Regular audits/inspections by DEL

• All incidents must be reported to DEL, serious incidents investigated by DEL

OHS Act-Section 16(1) Chief Executive Officer

OHS Act-Section 16(2) Head of Site Operations

OHS Act-GRM 2(1) Factory Engineers

OHS Act-Explosives Regs 12(1) Explosives Manager

OHS Act-Explosives Regs 12(1) Explosives Supervisors

OHS Act SHE Representatives Employee representatives

OHS Act-First Aiders Medical assistants

OHS Act-Permit issuers Work permits issuers

OHS Act-SHE Committees Safety Committee

Expl Act-Responsible Persons Explosives transport

Expl Act-Magazine Masters Explosive storage facilities

Legal Appointments in RDMAreas of interaction with the Department of Employment and Labour

Regulatory FrameworkDepartment of Employment and Labour Interaction



International Organisations

8

Skills development & knowledge sharing

Access to industry best practice guidelines, technological developments

Access to international incident database & incident learnings

Access to safety, health, environmental and security knowledge throughout our Group of companies

With participation and interaction we aim to achieve a much safer work environment aligned to international best practice

International Industry Association - SAFEX International Key focus is to eliminate the worldwide harmful effects of explosives on People,

Property and the Planet (Environment) by learning from each other’s experiences 106 International Member Organisations

South African National Institute of Explosives Technology - NIXT An institute that fosters the interests of the commercial, arms manufacturing,

military, mining, structural engineering, educational sectors 29 member companies incl DEL & SAPS

Shareholder Rheinmetall Group The international Rheinmetall group provides access to safety knowledge world

wide. Based on the international foot print (140 sites world wide), RDM benefits from the

intercompany exchange wrt to industry norms and standards on a daily basis.

International Industry Norms and StandardsWorld Wide Explosives Industry Network



RDM’s Operational Safety Management5 Key Principles

9

Infrastructure

• Preventative maintenance

& repairs on fire

protection systems

• Upgrade of key production

facilities (Explosives and

propellant manufacturing,

blending facilities)

• Electrical infrastructure

improvements & upgrades

Recruitment

• Recruitment of critical skills

(legal appointments)

• Optimized span of control

for explosives & plant

manager(s)

• Optimize and refine

employee induction process

• Improved manufacturing

planning to improve work

force retention (trained

skills).

Training

• Refined training program for

production staff

• Establishment of E-learning

platforms.

• Regular refresher training is

key to combat complacency.

• Establishing a sense of

accountability and

responsibility forms the

basis of a safe method of

working

Procedures

• Review & updating of work

procedures and instructions

• Review & update of

emergency procedures to

ensure effective and

efficient response to

incidents

• Retain ISO 9001, 14001,

45001 certifications

Leaderships

• Leadership visibility/visits to

production facilities

• Every employee is

empowered to stop work

immediately to prevent an

unsafe situation

• Monthly facility inspections

by senior management

• Entrenching a safety culture

on all levels



Measures to ensure ongoing safetyCurrent Status

10

RDM has 1,289 buildings across all four sites

Building infrastructure is in good condition and systems are in place to

routinely inspect and assess to ensure that safe conditions are

maintained

Facilities are fit for purpose for the processes

All explosives facilities in use have DEL building licenses

All sites have established and functioning Modification Committees

Regular building license audits being conducted

Preventative maintenance & repairs on fire protection systems

Upgrade of key production facilities (Explosives and propellant

manufacturing, blending facilities)

Consideration of new information and lessons across international

industry and benchmarking and making adjustment to current systems

when appropriate to ensure continues development of safety systems in

place

Maintaining a highest level of safety standard is the main focus for any operation

First line of defense to ensure a safe working environment, is to have safety engineered into facilities and equipment

Working in close collaboration with the DEL, all upgrades and changes to facilities are approved safe for use before and manufacturing

commences

Implementing improved manufacturing processes, based on new technology, will always be an ongoing process

RDM’s Operational Safety ManagementInfrastructure



A mixture of qualified, skilled, experienced, competent and

knowledgeable personnel on RDM process

Balance between new and experienced people

Recruitment requirements are position based to ensure that the skills

level are matched

Skills upliftment and development training well established

RDM Academy and Apprenticeship program

Recruitment of qualified critical skills (legal appointments)

Optimized span of control for explosives & plant manager(s)

Optimize and refined employee induction process

Refined training programs for production staff

Establishment of E-learning platforms

Improved manufacturing planning to improve trained skills retention

People are our most important asset, and needs to be safe at all time

All employees must be certified as competent in the execution of a task before the task may be allocated to them.

Regular refresher training is key to combat complacency.

Establishing a sense of accountability and responsibility forms the basis of a safe method of working

Implementing improved training processes based on lessons learned will always be an ongoing process


RDM’s Operational Safety ManagementRecruitment & Training




12

International Safety management system, e.g. ISO 9001, ISO 14001, ISO

45001

RDM has well established systems, processes and procedures in place

Safety management is fully integration into the business and

manufacturing processes

Training program for plant management on manufacturing and safety

related procedures

Clearly map and establish material flows for raw materials & products

Regular review and update emergency response procedures to ensure

effective response to incidents

Review and update of all plant & engineering drawings of production

facilities

Accurate, relevant and up to date documentation and procedures are key to working safely in an explosives environment

RDM has certified management systems to international standards

Safety is critical to safe and efficient production processes

Regular review and update of procedures to ensure its relevant and up to date

Implementing reviewed procedures based on new methods of working will always be an ongoing process

RDM’s Operational Safety ManagementProcedures




13

Top management support & commitment to safety

Open communication channels to voice safety concerns for every one

Every employee is empowered to stop work immediately to prevent an

unsafe situation

Safety/Risk management is part of doing business in RDM

All RDM systems and procedures have safety as highest priority

Pre-shift safety talks within working teams

Management to drive the closure of Corrective Actions, incident &

complaint investigations

Management visibility on shop floor

Management accountability for safety within its section/department

Planned Task Observations(PTO) by plant managers & supervisors, set

targets

Safety is not just a task but a way of life in conducting your work – “Safety Conscience Culture”

Management visibility on the plant is key to demonstrate commitment

A culture of safety being instilled from top leadership and no employee will be expected to place themselves in danger in pursuit of

production

All parties to participate and contribute to safety in the workplace

Entrenching a “Safety Conscience Culture” will always be an ongoing proses lead from the leadership

RDM’s Operational Safety ManagementLeadership



RDM handles dangerous materials on a daily basis and has a proven capability to do this safely:

Well designed and approved infrastructure

Adherence to the correct manufacturing and safety procedures

Thorough training and awareness to handle dangerous materials safely

RDM’s Operational Safety ManagementSummary

Maintaining a highest level of safety standard is the main focus for any

operation

People are our most important asset, and needs to be safe at all time

Accurate, relevant and up to date documentation and procedures are

key to working safely in an explosives environment

Safety is not just a task but a way of life in conducting your work –

“Safety Conscience Culture”

Developing new and improved safety measures will always be

an ongoing proses



RDM Procedural StepsLegal Requirements

15

OHS Act-reported to the DEL as required by section 24 of the OHSA andRegulation 15 of the Explosives Regulations.

Explosives related incidents must be reported to DEL ChiefInspector of Explosives(CIE) immediately.

OHS Act- GAR 9(2) to conduct an investigation to incident.

OHS Act-Incident report shared with Safety Committees.

Findings of internal investigation recorded as required and retained fora period of three years

All reporting to the Compensation Commission done within prescribedtimes

RDM has incident investigation procedures & standards

RDM has experienced & trained incident investigators

RDM has set templates and guidelines to ensure consistency in theinvestigation process.

All incidents are investigated and reported to the relevant authoritiesand RDM management.

Incident Management process is applied consistently for any type of incident

Effective management of incidents is key to improve safety and processes in RDM

Incident reports and learnings are shared across sites to prevent repeat incidents

Learnings, Corrective & Preventative actions are tracked by management until implemented

When required, DEL must give approval and be satisfied with actions before operations can commence

RDM’s Operational Safety ManagementIncident Management framework



RDM’s Somerset West SiteLocation

16

RDM Somerset West

Somerset West

Strand

Macassar

N2



RDM’s Somerset West Site Site Information

Expertise in propellant manufacture, charge assembly, pyrotechnics, high explosives and composite

materials

Pyrotechnics 40mm HE Double base Rocket Motor

Cast Composite Propellants

PropellantsCombustible Components

Case Coating & Assembly

Composites Projectiles

550 haSite Area

Buildings 490

Explosive 330

Non Explosive 160

# of Employees 1 034


17


It was a normal operational day on Monday 3 September 2018, at the Somerset West site

An explosion occurred at 15h28 during the blending of CBI single base propellant at a Blending Facility, as

part of the normal propellant production process

The Blending Facility was completely destroyed

Eight colleagues lost their lives

There was limited damage to the adjacent buildings, because of the prescribed safety distances

The RDM Emergency Response Procedure was activated and a Joint Operational Committee (JOC) was

established

Excellent support was received from all spheres of government

Somerset West Incident 2018Summary of Events



This process has been in use since CBI manufacturing was first started in 1980 and is similar to those used by other international manufacturers

Raw Materials

1

Mixing

2

Block Press

3

Extrusion

4

Glazing / Blending

8

Drying

7

Steeping

6

Cutting

5

CBI (Final Product)

9

CBI Single Base PropellantManufacturing Process



The investigation lasted close to 12 months and was concluded in October 2019

The RDM Investigation Report as required by the OHS Act (GAR9) was delivered to the Department of Labour in October 2019

RDM InvestigationLegal Process

OHS Act places a legal responsibility on Employers to conduct aninvestigation following any incident.

The learning from the investigation should be used to improve thesafety or processes and workers.

Department of Labour conducts an independent investigation.

In the event of a fatality an investigation by SAPS and other authoritieswill also be conducted to determine the cause of death.

An investigation team was appointed on the 10th of September 2018.

The multi-disciplinary team consisted of two propellant experts, amechanical engineer, a safety and health expert, a quality expert and aretired explosive incident investigator.

The team has extensive experience in the propellant and explosiveindustry and also utilised South African and international expertisewhere required.

The team had authority to investigate all circumstances and facts thatled to the incident and if possible identify the root cause of the incidentwithout any interference.

Somerset West Incident 2018RDM Investigation Approach



Somerset West Incident 2018Root Cause Analysis According to the RDM Investigation Team

21

An extensive Root Cause Analysis was conducted to investigate possible causes of the explosion.

More than 60 potential root causes were identified. Most were eliminated as impossible or extremely unlikely based on engineering

analysis, locally or international available data or experimental results.

The investigation established that during the mandatory routine testing of sub-lots in the course of the manufacturing process, it was

found that one sub-lot did not meet the required quality standards. However, due process was not followed and, instead, an attempt

to rework the material was made by adding extra graphite to the propellant.

The following conclusion was reached:

The most probable immediate cause of the explosion was electrostatic electricity build-up in a graphite cloud in the blender

and a subsequent discharge with enough energy to ignite the suspended propellant in the blending drum. This ignited the

other propellant which transitioned into a detonation.

This was a previously unidentified and unforeseen hazard by RDM and as far as the team has been able to determine, across

the industry internationally

It should be emphasised that it is not possible to determine with 100% certainty what exactly caused the IncidentThe above scenario is the most likely cause based on all known facts and analysis



Somerset West Incident 2018Actions Initiated by RDM after the Incident

22

Over and above the normal audits, a thorough re-licensing and inspection process of facilities in co-operation with DEL,

which included an assessment of safety systems in place, were completed. The facilities have since been determined as

safe and operations permitted to recommence.

Over and above the approved layouts, where possible changes were made to the layout and design of certain workplaces,

in order to ensure that employees are protected, as far as possible, from the source of any potential danger.

Over and above the normal training an intensive program of refresher training was conducted for all employees,

addressing specific work procedures and safety rules, underpinned by the principle that safety is always paramount.

Over and above the normal procedural review, all systems which may impact safety, were reviewed to ensure that RDM

utilizes best practices to minimize the risk of unintended errors on the part of any persons, at any point in its processes.

Over and above the approved protocols, Management controls and oversight protocols were reviewed to provide

additional tools and support to line managers and supervisors to assist RDM with the enforcement of safety rules and

procedures.



RDM’s continuous support to the eight familiesSince day of the incident - currently

23

RDM has endeavoured, as far as possible, to provide all support to the families involved. This has included

information sharing when possible, arrangements for emotional and psychological support and financial

assistance.

There were various counsellors and psychologists on site to assist the families and employees of RDM.

RDM assisted the families by covering out-of-pocket expenses during the mourning period, as well as covering

the costs of the funeral services. A memorial service was also held on site for the families, employees and

community members.

Voluntary and spontaneous contributions by Rheinmetall Group employees from across the globe (including

colleagues at RDM) were received and divided equally amongst the eight families and paid over to them

during a Christmas lunch held for them in December 2018. The amount received in total was: R770 610.52

(R96 326.32 per family).



RDM’s continuous support to the eight familiesSince day of the incident - currently

24

RDM invested capital with Momentum, specifically to provide long-term financial support for the

families. This capital is managed by Momentum to ensure all eight families receive a monthly income for

the next ten years. Minor children will receive monthly financial support until they reach the age of

eighteen. These monthly payments are made to all the families by Momentum. An annual increase of 6%

is applicable on some of these payments.

A collective ex gratia amount is paid to all the families on a monthly basis.

These amounts are over and above statutory compensations which are COID and pension fund.

RDM remains in regular contact with the families, and continues to offer counselling services and

tailored support for the families and all of our staff.



RDM’s Garden of RemembranceTo honour the lives of our dedicated colleagues

The Garden of Remembrance and memorial wall is situated at RDM’s head office in Somerset West inhonour of staff members who have lost their lives on duty.

It is a permanent place of refuge that provides a spot for reflection and meditation and which is open tothe staff and the public.

25



RDM’s Initiatives in response to COVID - 19Rapid-response measures to support the community and essential workforces

26

Production of Hand Sanitizer

Change of production to support the fight against COVID19: RDM Somerset West started production of Hand

Sanitizer in co-operation with a local partner

RDM provides to surrounding communities, and international clients

RDM receives numerous requests form foreign security forces to supply Sanitizer

RDM is confident to supply to the local demands and utilize the spare capacity to support other governments tackling the COVID19 pandemic in a common approach

Providing Support for SANDF

Support to the SANDF:

RDM donates 6000 liter of hand sanitizer, during lockdown level 5

On continues basis RDM supplies hand sanitizer to SANDF

Providing Support for Local Communities

Support to the local communities (services & goods):

RDMs offered building for storage for COVID- 19 related material

RDM donates 2000 parcels containing 500ml hand sanitizer, tissues and soap to the surrounding communities during lockdown

RDM’s staff nurses are supporting both initiatives around the clock

Doing everything possible to push-back the spread of the COVID19 pandemic in South Africa



Sonyongwana High School Economic Development Daycare CentreInvesting in the future of South Africa – RDM supported with the following projects/ investments:

3 Fully equipped Physics, Chemistry and Computer Labs Donated 920 Bicycles Established a borehole and upgrades to ablution facilities

and continuous maintenance Matric results improved from 41% to 93% Paying monthly salaries of Maths and Science teacher (x2) Security Personnel (x2) and Ablution Maintenance lady

Corporate Social Responsibility Investments

Accelerating the transformation of South Africa’seconomic development by supporting local SMEs:

Gardening & Car Wash Services Cleaning Services Internal Transport Services Forge press 4 Medical & Health Care Centers Canteens and Catering Services

Catering for the underprivileged community of Deep Freeze,RDM’s staff’s and the surrounding community.

Can accommodate 160 kids, from 6 months – 6 years old(Grade R)

24 Jobs created: 1 principal, 1 deputy principal, 8Teachers, 8 Assistant teachers, 2 kitchen staff, 1 cleaner, 1gardener, 1 receptionist, 1 accountant

Safe, affordable, state of the art educational facility



BBBEE StatusLevel 3 (new code)

Next to the direct employment effects generated by RDM directly, RDM created – interwoven withsuppliers, contractors and the like - employment and economic growth within it’s vicinity.

BBBEE

In mZAR

1.4 bnZAR

Total BBBEE spend in 2019

25

1381.2

1.6 3.9

Skills Development PreferentialProcurement

EnterpriseDevelopment

Socio-economicDevelopment



RDM’s OperationsFour sites across the country – one integrated Value Chain

Boksburg Steel

Production

Non-stock

Capex

Services

Wellington Chemicals

Production

Coal

Capex

Non-stock

Services

Boskop Plant Engineering

Capex

Transport

Machined Items

Production

Non-stock

Services

Somerset West Capex

Product Development

Machined Items

Production

Packaging

Services

Shipping

Wellington

Somerset West

BoskopBoksburg

Local Spendin 2019

1.7 bnZAR



WE HAVE A RESPONSIBILITY

TRUST TRANSPARENCY

RELIABILITY

PARTNERSHIP

Somerset West Wellington Boksburg Boskop

Rheinmetall Denel Munition RF (Pty) Ltd

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Transcript of Rheinmetall Denel Munition RF (Pty) Ltd