The South African defence industry is facing a number of challenges and to overcome these needs to promote itself and actively develop not just products but markets.
This was the general consensus by speakers presenting at the South African Aerospace, Maritime and Defence Export Council (SAAMDEC) Strategic Planning Session held at Saab Africa in Centurion last week.
Dr Moses Khanyile, National Defence Industry Council (NDIC) Strategy Project Leader, cautioned that the declining defence budget has been affecting local demand and that by 2021/22 the acquisition budget “will almost be obliterated.”
He said that Denel’s challenges are affecting the entire industry, with a survey of 300 companies operating in the defence space revealing that 18 were in trouble and could go under, affecting South African National Defence Force (SANDF) projects and capabilities. Denel is working hard to turn itself around and return to profitability, but this process will not happen overnight.
“Does this mean the end of our industry or does it mean we have to be more creative in developing not just products but markets?” he asked.
Khanyile urged industry and government to interact, particularly with regard to the Defence Industry Fund, which has struggled to come online. He suggested some ways to improve the industry’s performance, including bartering defence products for other goods to overcome financing limitations.
Dr Lucky Mathebula, Founder of the Th!nc Foundation, suggested a number of ways the defence industry could promote itself, most importantly through advocacy. This would need to target the Cabinet, Luthuli House, Parliamentary Portfolio Committees, professional associations, think tanks, industry membership organisations, shadow ministers, ministerial advisors and the President. Defence should be positioned as promoting economic growth and development in line with President Cyril Ramaphosa’s goals. “If you want funding, you need to talk employment creation rather than bombs,” Mathebula said.
He also urged closer relations with defence attaches and suggested the industry invite portfolio committees to view the industry’s capabilities. Mathebula said the industry has a number of advantages it can promote, including being the leading military technology developer in Africa, using advanced manufacturing processes with commercial applications, and being able to help solve problems like xenophobic riots, porous borders and terrorism.
Rakhee Ramgolan, heading up the Sustainability development function at Armscor, said exports can be promoted through government-to-government contracting. For example, Armscor can facilitate contracts from countries that have non-United Nations sanctions (for example only US sanctions). “We are politically neutral – let’s leverage that,” she said. Armscor could also function as the main contractor when a customer requires the participation of multiple companies.
Another opportunity for the local defence sector is making use of South African National Defence Force equipment and services for training and maintenance, repair and overhaul. This would benefit the SANDF by giving it training hours as well as a badly needed cash injection, and would in turn benefit local contractors.
SAAMDEC CEO Sandile Ndlovu highlighted some of the challenges facing the local defence industry as well as possible solutions. Challenges include the shrinking defence budget, the unpredictable regulatory environment, reduction in research and development spending, 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.
As a result, the industry needs to develop a formal advocacy structure, identify and develop other sources of funding and consolidate all companies under a united front, Ndlovu said.
SAAMDEC has been promoting the industry through, amongst others, trade missions around the world, with 15 industry-funded missions over the last four years as well as Department of Trade and Industry funded missions. These include to Uruguay, Argentina, India, Kenya, Ethiopia, Tanzania, Algeria, Botswana, Zambia, Namibia, Nigeria, South Sudan, United Arab Emirates, Saudi Arabia, Pakistan, Angola, Brazil, Russia, China and Mozambique.