Parliament’s Joint Standing Committee on Defence (JSCD) is so concerned by the inability of Denel to deliver Badger infantry fighting vehicles to the South African Army under Project Hoefyster that it will ask defence minister Nosiviwe Mapisa-Nqakula to intervene.
This comes after Denel on 28 May appeared before the committee in a virtual meeting to brief it on defence projects, specifically Projects Hoefyster, Biro and Hotel.
Denel was contracted to develop and deliver 264 Badger infantry combat vehicles to replace the Ratel infantry combat vehicle under a R9 billion contract. The delivery of the project was expected to start from 2019 and end in 2023. The committee heard from the briefing that the project is three years and nine months behind schedule, and that Denel is unable to deliver on the agreed contractual technical specifications and price.
The committee raised concerns over what it said is a clear inability of Denel to deliver on the project according to the specification of the client. “The unfortunate thing is that there seems to be a misalignment on progress status between Denel and Armscor. The committee has called upon all the parties involved to converge and agree on where the project is, and what is the best possible way forward,” said Cyril Xaba, the Co-Chairperson of the committee.
The Committee on Friday said it will ask Mapisa-Nqakula to intervene in the inability of Denel Land Systems to meet its contractual obligations to Armscor with respect to Hoefyester, and report back to the committee.
The Committee said the delayed delivery of the project and the resultant escalation of costs was also an issue of concern, especially in the context of the dwindling defence acquisition budget and the capability gap created by the inability to deliver the Badger vehicles.
“Furthermore, the committee has noted the liquidity position of Denel as another problem that contributes to the delayed completion of the project and a serious risk to the entire defence industry. According to Denel, currently the suppliers are not supporting the programme because of the outstanding unsettled invoices due to legacy debts,” the JSCD said.
“While the committee is cognisant about the problems of Denel that are historical, and the fact that the entity is currently implementing a turnaround plan, the committee called for a greater reflection on the plausibility of completion of the project, especially in the context of the huge investment that the Department of Defence, through Armscor, has made on the project.”
Armscor said to date it had paid R7.3 billion towards Hoefyster, but the total cost could escalate to R16.75 billion.
The committee raised concerns over the reputational damage that Denel has suffered as a result of the delay of Denel Land Systems to deliver on its contractual obligations, especially at a time when the State Owned Entities should reposition and rebrand themselves, and improve their technical capability to contribute towards job creation in South Africa.
Armscor’s General Manager for acquisition, Sipho Mkhwanazi, told the committee last week that they are worried that the contract is becoming unaffordable. “If need be a decision of cancellation is to be cancelled, it has to be taken urgently. Each day that passes, we are experiencing an escalation in cost. If we delay the decision; that is an additional risk for the DOD and Armscor.”
Deputy Defence Minister Thabang Makwetla told the committee that the cancellation of the contract is firmly on the table under the right conditions. “If we had the first phase executed as planned, possibly it would have been relatively workable to walk away because the design and development would be there as the value that Armscor can keep going back to later on when the situation allows,” he said.
The Badger is a modified version of the Patria 8×8 vehicle fitted with a flat bottom mine resistant floor and other changes. 21 vehicles will be sourced from Patria while the remainder were to be completely manufactured in South Africa. The Badger is being produced in nine different variants including a mortar version with a 60 mm breech-loading mortar, an Ingwe missile variant, section variant, signal variant, ambulance variant, command variant, fire support variant, and artillery variant. The section and fire support variants will be equipped with the 30 mm (30×173 mm) GI-30 cannon locally developed by Denel Land Systems. Although Denel Land Systems is the primary contractor, numerous other suppliers contribute to the programme.