The decline in local defence spending and budget constraints is impacting growth of the South African defence industry and international partnerships are a way to survive.
This is according to Dr Nivan Moodley, Vice President: Business Development and Strategy at Saab Grintek Defence. Moodley was a keynote speaker at the recent Aerospace, Maritime and Defence conference.
Between the 1970s and the 1990s, the South African defence industry was totally dependent on local defence requirements to sustain its business, but by the end of the Angolan war and the demise of apartheid, local military equipment requirements were seriously eroded, the Aerospace, Maritime and Defence Industries Association of South Africa (AMD) noted.
Relief came at the end of the 1990s when government decided to modernise a substantial portion of its defence capability through the acquisition of major military systems from international original equipment manufacturers (OEMs), known as the Strategic Defence Packages (SDPs).
Participation of local South African companies in these was mandatory, resulting in all main contractor contenders investigating and analysing the local South African defence industry capability. This provided an advantage to local companies as foreign equipment manufacturers visited South Africa on an unprecedented scale and provided local companies with invaluable exposure and marketing potential to the world.
“One example of a partnership between local and international companies as a result of this interaction and the requirements of the Strategic Defence Packages, Avitronics was acquired by Saab, known today as Saab Grintek Defence,” said Moodley. This is the South African subsidiary of defence and security company Saab.
“The decline in local defence spending in difficult defence budget conditions does not allow for sustainment or growth locally. This is evident in the low number of surviving defence companies compared to two decades ago,” said Moodley.
“The types of international partnerships which enabled Saab Grintek Defence to benefit from being part of a multinational company with a global business footprint are vital to boost the local defence industry’s future growth and development,” he said.
Further the reduction in local defence spending had an effect on research and development spend. Companies fund their own R&D almost entirely or benefit from foreign partners interested in these endeavours. “In some cases, foreign companies approach local defence companies with known IP and expertise to partner with for development of technology creating a win- win solution for the company,” Moodley said.
“At Saab Grintek Defence, we are fortunate to have long-term partnerships with many large OEMs, ensuring our products are fitted in more than 30 countries,” he said.
“The Strategic Defence Packages approach enhanced access to international defence markets and modernised production facilities, which may not have materialised without this acquisition. Going forward, the local defence industry needs to establish and invest in this type of long-term relationship, allowing parties to share risk and accountability, to leverage off international OEM marketing efforts, providing regional diversification and access to global business,” Moodley said.
Moodley added it is often possible for companies to bid for large European Union or NATO contracts if they are a supplier to a major OEM. In Saab’s case, Saab Grintek Defence won large contracts for export customers in large part due to the global presence and reputation of its parent. One example is the supply of defensive aids suites to India.
Once a company is a supplier to a manufacturer, that often means repeat business. For example Saab Grintek Defence started supplying a European OEM in 2002 and received multiple repeat orders for its IDAS self-protection system for Puma/Caracal series helicopters.
“It’s good to invest in long term relationships,” Moodley said encouraging local companies to get their systems onto platforms. “Long term relationships provide sustainability and good returns. Once you’re on a platform it’s hard to be taken off.”
Other companies with successful international partnerships include Denel with Hensoldt (to create Hensoldt South Africa), Rheinmetall (to create Rheinmetall Denel Munition) and Tawazun (to create what is now Al Tariq).