Tuesday, July 17, 2018
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SA Defence Inc. not in a good place

SA Defence Inc. – the colloquial name military watchers have given to the country’s armed forces and its defence industry – looks set for basket case status unless there is urgent and positive intervention.

While the uniformed side has its own share of problems, euphemistically called “challenges” by some, the defence industry is arguably worse off. To use a medical analogy, it’s moved from high care to the intensive care unit.

This was apparent during last week’s launch of the Defence Industry Fund (DIF) in Pretoria.

In 1988/90 the local defence industry posted a turnover in excess of R31 billion. This has now dropped to R19 billion when figures are adjusted to 2017 values. Similarly SA National Defence Force (SANDF) acquisitions placed with local defence industry companies in 1988/90 stood at R26.2 billion. The current figure is R7 billion.

Defence exports have also taken a turn for the worst. National Conventional Arms Control Committee (NCACC) reports show that South Africa exported between R3,5 and R4.,5 billion worth of equipment in 2017, compared to R4,1 billion in 2016, R2,7 billion in 2015, R2,98 billion in 2014 and R3,2 billion in 2013. This is down significantly from the R10,6 billion in 2012, R5,2 billion in 2011, R8,3 billion in 2010 and R7,8 billion in 2009.

Employment figures confirm this disconcerting trend. From a high of three thousand companies to 120 at present the workforce now is just 15 000 compared to the 130 000 it was. Many of the skilled engineers that make the industry tick are reaching retirement age, leaving a massive skills gap that is not being filled.

Whilst South Africa has been world renowned for artillery, unmanned aerial vehicle (UAV), mine-protected armoured vehicle and missile technology, it is falling behind in most of these areas, particularly as funding is lacking to invest in research and development and take exciting projects like the G7 LEO cannon forward. China, for example, has completely overtaken South Africa on the UAV front.

It’s going to take a lot more than the nursing care this sector of the national economy is presently receiving if it is ever going to become healthy again and contribute to national growth.

Registering as a supplier to the United Nations, boosting small- and medium-sized enterprises (SMMEs) and the Defence Industry Fund are, at the time of writing, just talk.

Not a single contract has yet come from registration as a UN supplier by Armscor on behalf of the greater South African defence industry.

It’s going to be difficult to grow a substantial SMME base until such time as the long-awaited Defence Sector BBEEE charter becomes reality. It, in different guises, has been on the table for at least 10 years and the ball is now again in the court of Trade and Industry Minister Rob Davies. The draft was published for public comment and input in the third quarter of last year and, apparently, has to undergo another round of public participation before it can be gazetted.

Doubts have already been expressed about the ability of the DIF to make any substantial contributions to the local defence industry. It is early days and one hopes actions will, sooner rather than later, speak louder than words.