Pulling the South African defence industry out of the mud


The recent Public Private Partnerships (PPP) for Defence and Security conference provided an interesting outlook on an alternate future for the defence and security sector.

The PPP conference highlighted the complex nature of the rapidly deteriorating security environment combined with a lack of government resources.

The SA Defence Industry (SADI) environment problem analysis aligns with the grief process:

Shock & Denial – “I can’t believe this is happening.” The SADI has declined from 3 000 companies with 130 000 employees in 1990 to 120 companies employing up to 12 500 employees in 2017.

Anger – “I am so angry and I’m not sure why or who I am angry at.” The under-funding of the SANDF has had an impact on the SADI as there is an under-utilization of strategic capabilities. R&D funding has declined to such an extent that limited new products are being developed. The SADI capabilities are being kept alive by means of exports. New entrant countries to the market are even moving past the SADI in supplying our historic niche market solutions.

Bargaining – “If only I had done this differently.” There are companies that focus on niche markets, but in the main it is the companies with strong ties to one or more international defence group/s that give them additional access to the international market that are staying afloat.

Depression – “I just feel so sad and alone.” The Defence Review 2015 presented a potential roadmap to a positive future. Failure to even fund the basic “arrest the decline” milestone has left the SANDF with no funds for even maintaining existing equipment, never mind acquiring new equipment or upgrading existing equipment. State owned Denel has been hollowed out with limited deliverables flowing to the SANDF, never mind export market. This has plunged the private led SADI into the depressed state of “you are on your own”.

Acceptance & Hope – “I have found peace”. The SADI has started to adjust to this new normal life without Denel as a lead. The SADI understand that there needs to be a push for an export focus only, even in an environment where there is a lack of support from government to promote the SADI’s products.

Two mud related idioms capture the current feeling within the defence industry. The first idiom, Stuck in the Mud captures the inability to complete a task due to a lack of understanding, competence or will. Advocate Vasu Gounden, Founder & Executive Director of ACCORD, provided the best summary of this state of affairs in his contribution to a PPP Conference discussion panel. The second idiom, Clear as Mud references problems that are confusing and unclear with the result that they are very difficult to understand or interpret.

The SADI, and by extension the SANDF, need to solve a stuck in the mud type challenge with a solution that isn’t clear as mud. The current solution is not working. Albert Einstein states, “We cannot solve our problems with the same thinking we used when we created them”, and then “Insanity is doing the same thing over and over and expecting different results.”

This is a complex problem, but turning the SADI around is still possible. PPP could be one of the mechanisms to accelerate a turnaround in total defence capabilities. What is clear is that the SADI has a very strong core capability. The potential is available to unlock significant value. The question is what we can make out of this core capability through exploiting alliances, initiatives, continuities, and discontinuities.

So, the Old SADI seated around State owned Denel is dead. Arise the new private led SADI.

The seeds of the complex problem analysis are provided in the Defence Review 2015, the South African Defence Industry Strategy 2020 and the Aerospace and Defence Industry Master Plan of 2020. The SA challenge is that these good plans achieved nothing without implementation.

The Minister of Defence has tasked the SANDF with the generation of the Long-term Capability Development Strategic Plan for review by March 2024. If it is possible, the SANDF needs to align with SADI, state owned and private sector capabilities. The PPP model also needs to be considered.

The Defence Industry is an Apex Ecosystem. The defence ecosystem has the potential of providing the country with a significant return on the investment. According to Helmoed Römer Heitman, in Business Day July 2023, there is evidence that defence spending does not have harm to an economy. The Singapore example shows that defence spending of up to 4% of GDP is not associated with lower rates of economic growth. The defence industry has more the opposite effect of stimulating opportunity and thus economic growth.

Team SADI need to take the lead in guiding the defence industry discussion. The target for the new SADI should be for minimum annual revenues of R70 billion coupled with the expansion of the employment capacity to over 50 000 employees. Transformation of resources is a natural progression with this amount of growth in employment. This growth can be achieved in the five-to-ten-year medium term. For this to be realised, the SADI Strategy 2020 desired course of action to “secure, stabilise, develop and sustain” the defence industry is the only course to be considered.

Current SADI capabilities are geared towards specialised, highly mobile combat capability solutions that can be rapidly deployed to remote areas for specific operations. The SADI has a well-developed landward combat force capability. The solutions can be configured as projectable, multi-role, lighter, infantry-based landward capabilities with enhanced firepower, manoeuvre and protection making the solutions suitable for a range of contingencies. SADI solutions can also cover many of the joint and supported airborne, air-landed and sea-landed assault operations, with air- and sea-deployable firepower, protection and manoeuvre.

The challenge remains securing funding for the SANDF’s capability rejuvenation. Local funding, offset with PPP solutions, will stimulate projects within the defence industry sector. The SADI needs projects to retain and attract skilled resources to implement technology for future products. The SANDF identified product developments need to align with the needs of the wider export market. This approach assists in ensuring the long-term sustainability of the defence industry. Government needs to place a focus on the defence sector and the SADI revenue generating potential. The SADI could use government support in supporting the export focus. In this aspect the streamlining of the export control system needs to be addressed. DIRCO assistance would also be useful in promoting SADI products. The SADI can then apply the partnership model to unlock the full potential of the sector.

It is now time for the Defence Industry Lekgotla, including decisions and actions on PPP, to assist in Pulling SADI out of the Mud.

Written by James Kerr, Orion Consulting CC, which provides Market Entry Strategy and Bid & Proposal services to the Aerospace & Defence related industry and assists international SME mission system product suppliers to gain traction in South Africa.

To view the presentations from the Public-Private Partnerships for Defence and Security conference, held on 16 August, click here.