NCACC regulations ‘could destroy the industry’

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The halt of export approvals to South Africa’s biggest military clients Saudi Arabia and the United Arab Emirates (UAE) could destroy the South African defence industry, experts have warned.

Several big defence companies, including Rheinmetall Denel Munition (RDM) have complained that the National Conventional Arms Control Committee (NCACC) is insisting that it be allowed to inspect customer countries’ facilities to verify compliance and that they must sign end user certificates (EUCs) in which they pledge not to sell their weapons on to third parties.

Saudi Arabia and the United Arab Emirates, which account for at least a third of South Africa’s arms exports, have rejected the inspections which they consider a violation of their sovereignty, whilst Oman and Algeria have also refused inspections and seen imports blocked, Reuters reported.

“We’ve got one clause that’s disabling us from exporting R25 billion worth of value today, right now,” Simphiwe Hamilton, the head of the Aerospace, Maritime and Defence (AMD) industries association told Reuters. The industry body estimates the export blocks put an additional R50 to R60 billion in future business at risk and could cause the loss of up to 9 000 jobs at defence firms and supporting industries.

Darren Olivier, Director at African Defence Review, noted the question of ad hoc post-delivery verification of arms shipments is a contentious one, subject to much debate, and as yet unresolved at a global level. “In many cases it’s impractical.”

He believes it is good for South Africa to oblige by both national law and its membership of the Arms Trade Treaty to have adequate checks to avoid human rights violations and prevent its weapons from being re-exported or diverted by end users without explicit permission. He added that standard international practice is based on delivery verification certificates and open source monitoring. “These approaches have some limitations, but at least for large systems are generally effective.”

“While there’s not much a country can do in terms of immediate actions if it’s determined that a country has violated the EUC terms, it can prevent further sales. In fact, the South African National Arms Control Committee Act requires that such countries be denied future permits.

“Why then, has the NCACC begun insisting on a requirement for ad hoc on-site inspections in all EUCs? Is it worth the damage done to the South African defence industry, which has more than R25 billion in orders held up, and jobs on the line, because of it? In short, probably not.”

Olivier adds that in cases of past breaches, the NCACC has been unable to take action and on-site inspections won’t solve this. The NCACC, he believes, also lacks the capacity for effective on-site monitoring (as do countries like the United States) while countries like Germany only insist on end user certificates for high-risk countries.

“The NCACC already has substantial capacity problems, taking months to process marketing and export permits. It does not have enough skilled staff to conduct on-site inspections too, nor do South African diplomatic staff have the qualifications or training to do it on their behalf,” Olivier states.

Then there is the fact that few countries, even responsible democracies like European Union member states, are willing to accept conditions on all arms sales that permit any selling country to inspect their facilities without notice. It’s too high a national security risk and South Africa would be unlikely to agree to such conditions itself, according to Oliver.

“South Africa should ensure that it does not export to bad actors or contribute to human rights violations, even if that means losing a few sales. But the same aim can still be met without requiring on-site inspections in every case.

“Requiring ad hoc on-site inspections of arms sales in all cases is solving the wrong problem, of questionable effectiveness, not likely to be accepted by any customer, and could destroy the South African defence industry for no gain. It should be reconsidered,” Olivier concludes.

According to defence expert Helmoed Romer Heitman, the refusal of export permits to Saudi Arabia and the UAE as well as Algeria and Oman potentially closes four of the six biggest near/medium term markets to the South African defence industry. “If that is not addressed, the industry will die.”

Heitman states the obvious implications of that are job losses, the loss of most of the present (already shrunken) export earnings and the longer-term loss of strategic independence, making South Africa dependent on one or more of the major powers for equipment and support.

“Between the loss of export revenues and those outflows the negative swing could be anywhere between R15 and R40 billion annually, depending on whether we assume developing the Defence Force of the Defence Review and developing equipment for it, or a smaller Defence Force with less development funding.

“But there is another, much more critical, impact of the block on exports to Saudi Arabia and the UAE: both countries have promised President Ramaphosa $10 billion in investments in South Africa. If we continue to insult them by blocking defence equipment sales, I do not see those investments coming through. So whatever the thinking – if any – behind this, the net effect may be to sabotage the investment drive launched by the President, with unhappy outcomes for the economy.”



The NCACC briefed the Joint Standing Committee on Defence on its 2018 and 2019 reports and other matters on Thursday 5 December, but further details of the meeting have yet to emerge.