A defence industry lekgotla next month will bring together the Department of Defence, industry representatives, policy-makers and academics to try and address some of the challenges facing the South African defence sector.
This is according to Dr Moses Khanyile, National Defence Industry Council (NDIC) Coordinator, who was briefing the Joint Standing Committee on Defence on 3 March on plans to boost the South African defence industry.
He explained that the NDIC decided there must be a defence industry lekgotla to address industry challenges. The primary aim of the lekgotla is to gather all relevant industry role-players, including the Minister and Deputy Ministers of Defence and Military Veterans, and the Minister of Public Enterprises, parliamentary committees on defence, policy-makers, academics and industry representatives, to come up with a coherent national view on how challenges will be dealt with.
Around 150 to 200 participants are expected to take part in the two-day event in April, subject to confirmation of logistical arrangements. The lekgotla will be held at a venue in Pretoria.
Secretary for Defence Gladys Sontoe Kudjoe told the Joint Standing Committee on Defence that the fiscus is drying up and impacting all of government, including defence, and so the idea of the lekgotla is to have all the “brains” come together to investigate how the defence sector’s problems can be resolved.
This will most likely include the Department of Public Enterprises, Department of Trade, Industry and Competition, Denel, various director generals and other sector roleplayers.
Today, the South African defence industry is in a perilous state after years of decline and more recently due to the effects of the COVID-19 pandemic and state capture. According to research by the Aerospace, Maritime and Defence Industries Association, industry revenue declined from R19.5 billion in 2016 to R12.5 billion in 2020; exports declined by almost half from R12 billion to R6.5 billion; and research and development spend dropped from R1.7 billion to R500 million over this period. The number of people directly employed in the defence industry dropped from 15 000 in 2016 to 12 500 in 2020.
Exports grew from R873 million in the mid-1990s to R6.5 billion in 2019/20, but they have been in decline since 2016 after peaking at the height of the Iraq War. This is of concern to the industry, which relies on exports to survive in the face of a shrinking home market. The defence industry depends on exports for more than 50% of its total revenue. If exports continue to be constrained, the industry is facing a 40% reduction in workforce, the loss of 25 000 jobs along the supply chain, reputational damage to the South African brand, a reduction in tax revenues and a decline in technology investments. AMD has warned that if current trends continue, in five years’ time the industry will be almost redundant.
Exports are being hampered by inefficiencies within the National Conventional Arms Control Committee (NCACC), inadequate political support, inflexible financial instruments/funding mechanisms, and a lack of appreciation and understanding of the role the industry can play in meeting national priorities.
A shortage of qualified and experienced engineers also effects the industry, and this has been compounded by difficult economic conditions (particularly at Denel) seeing engineers going abroad to work for Saudi Arabian and Emirati companies, amongst others.
In his presentation to the Joint Standing Committee on Defence, Khanyile said that the continued challenges at Denel have had disastrous effect on the entire defence ecosystem, including the total collapse of small to medium defence companies; derailing of industry transformation; and unabated skills drain. Sovereign integrity has already been compromised due the shortage of equipment for the South African National Defence Force and the Denel situation has exacerbated this.
Another threat Khanyile highlighted is the Open Secrets legal bid to stop 37 South African companies from doing business in Saudi Arabia and the United Arab Emirates. This bid, launched in mid-2021, is still before the courts. Khanyile said it is important that government efforts to oppose this matter continue to be supported and resources made available, as if Open Secrets is successful, this could “potentially obliterate the defence industry.”
“The potential impact of this case, should it be lost, would have on the Defence Industry is too ghastly to contemplate,” Khanyile stated. “There must be a coordinated and unified approach to defending the case – industry believes that government must take the lead in this regard.”
