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Archive: Whither the Defence Industry?

The state of the “defence-related” industry is terrible and it’s getting worse. The question of whether there will still be a defence industry in five years’ time at the current tempo can be answered in the negative. It is an industry steeped in incompetence and Denel. While everybody pretends otherwise the industry is collapsing.
From industry side, there is a lack of strategic vision, an inability to market and sell and a refusal to acknowledge that brand and product awareness in the market requires continuous advertising. AMD, the industry organisation is dysfunctional except as a vehicle for self-enrichment by those running it and no industry lobby exists. Industrialists also hold the contradictory views that their supporting media can survive with no advertising or editorial support and by dishing out free copy. They further hold it as true that in between scratching for a living and generating editorial copy, such media has plenty of time to act as unpaid lobbyists and facilitators – to be afterwards ignored until the next screw-up. The South African defence industry was built in a captive market where marketing and sales were simply not required. Neither was any realistic sense of pricing. The first mindset is still in place and one can see the second in the pricing models used for some of the offset deals under government`s Strategic Defence Package (SDP). No commercial sense can de discerned. In short, our industrialists are – in general – short-sighted, without vision, greedy and out to fleece each other and the taxpayer.
 
 
The taxpayer`s representative, the government is equally in denial. Earlier this month, it seemingly, through Defence Minister Mosiuoa Lekota denied the existence of its 1999 White Paper on the Defence Related Industry. In comments announcing the need for a new white paper on the matter Lekota spoke as if there was none currently – and he made no mention of the 1999 work. Odd. Also to be questioned is whether the economic conditions exist locally to support defence manufacture. Defence offsets related to the SDP are working – from a certain point of view. Factories that would otherwise have been idle and workers who ought have been unemployed are still at work. But for how long? A number of companies plan to dump production as quickly as possible after the offsets are over because it is simply not economically viable. South Africa`s productivity levels simply cannot compete with those of the East in the open market. Due to Iscor`s flat steel prices it is cheaper to import finished products from China than to make them here – and the list goes on. How viable is the Department of Trade and Industry`s plans to stand up an aviation industry in a country that does not manufacture aircraft-grade aluminum? When will the DTI`s three legs start working together. When one leg seems ready to walk forwards, the others seem ready to trip it up. For example, in supporting defence exhibitions, the DTI cannot support defence journals as they do not manufacture. They can also not buy copies for distribution under current rules. Yet they are agreed that the media must be there to do its important work.                     
 
 
Within the Department of Defence there is conflict between the Departmental Acquisitions and Procurement Division (DAPD) and Armscor. The former, staffed by short-term appointees and with no graduate engineer back-up thinks it should be in charge of the Acquisitions and Procurement process. Armscor, with career staff and graduate engineers keeps being sidelined in conspiracies involving industry and DAPD. This will not do. Neither will the DAPD`s attempts at short-circuiting Armscor and the defence industry inventing spurious charges against the acquisitions agency. There are those, especially within Denel, who insist that Armscor is interfering in their business through vehicles such as Technology Exploitation Centre (TEC). This centre is supposed to find commercial uses for government-owned patents. But it is debatable that the TEC has achieved anything since being established, exposing the industry claim to ridicule.        
 
   
This is not to say that Armscor cannot be improved. Everything is open to improvement. There seems room for greater efficiency and synergy in consolidating some of Armscor`s subsidiaries, commercialising others and establishing closer links with academia. A number of Armscor Research and Development facilities can only prosper by co-operating more closely with existing universities.   
 
 
Is it too late to save the industry? It may not be too late to save some but it is already too late to save it all. What is needed above all is REALISM. A realistic white paper with a vision of what is required for the industry as a whole. Clarity on what the future needs of the SA National Defence Force are and how they will be met. Greater transparency and certainty in the defence export field in terms of what may be sold or marketed where. Africa is this country`s national market – but can we sell to it? Better cooperation between industry, Armcor and DTI is also vital and the DTI must solve its internal contradictions. Industrialists must curb their greed and charge "third world prices for third world goods" if they plan to sell to that market. Less trips to the Middle East/South Asia and more to the rest of this continent. Take a leaf from Chris Moerdyk, a fellow at the Marketing Federation of Southern Africa. It was he who accused business of being "completely incapable of even the most rudimentary form of decision-making." Writing in the Sunday Times, he added: "And it has nothing to do with affirmative action, either, because the overwhelming majority of culprits are insecure, shrinking-violet whiteys who are in over their heads. At least blacks who are promoted above their competence are generally willing to learn, but their white counterparts just doggedly believe they know it all. The underlying reason for this corporate constipation, my research tells me, is a combination of chronic brain-drain, I'm-all-right-Jack attitudes and lack of management training. For starters, the vast majority of executives do not realise that risk is an essential part of business survival. They are terrified of taking any sort of decision for fear of making a mistake. Instead, they resort to decision by committee so that if there's a cock-up the whole bunch of them will go down together. Most have no idea what the role of a manager really is. They seem to believe self-preservation to be paramount and employ only dunces who can't threaten their jobs - unlike in Japan, for example, where an executive's performance is judged on how many of the people he employs eventually rise to positions above him. Something else my research tells me is that there are government departments that are far more decisive, committed, businesslike and efficient than the bulk of private enterprise," Moerdyk wrote. If so, the bulk of private "enterprise", and the defence industry in particular must be proving that term a contradiction as amusing as the infamous "army intelligence."
 
27 June 2004
 
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