The South African Navy’s main vessel projects are under threat from budget cuts, along with the SA Army’s Project Hoefyster for new infantry combat vehicles, Parliament has heard.
The Portfolio Committee on Defence and Military Veterans was this week told that Projects Hotel (for the acquisition of a new hydrographic survey vessel), Biro (for the acquisition of three new inshore patrol vessels), Syne (the mid-life upgrade of the four Valour class frigates) and Napoleon (mid-life upgrade of the three Type 209 submarines) are affected by budget cuts. They all depend on sufficient funding for completion.
Current Strategic Capital Acquisition Master Plan (SCAMP) funding for Biro, Hotel and Hoefyster amounts to R2.8 billion, but the funding needed to honour these contracts amounts to R13.7 billion, leaving the Department of Defence with a shortfall of nearly R11 billion over the contract periods for the three projects, the Committee heard.
The South African Navy has drafted requirements for the mid-life upgrade of the frigates and submarines under Projects Syne and Napoleon but due to a lack of funding these projects are currently on hold.
“The Department of Defence endeavours to ensure we have a modern military force but the decline in funding impacts on that. The Department of Defence cannot enter into any new contracts to modernise current equipment in defence,” it said.
Ageing vessels are impacting the amount of time the SA Navy can spend at sea. For example, the Navy could not send a vessel on patrol as part of maritime security Operation Copper in the first quarter of this year because the frigate that was assigned had a technical problem and had to return to port.
Projects Syne and Napoleon
The Navy’s four Meko A200 Valour class frigates were to receive upgrades under Project Syne from 2017-18. Work was due to take place over a decade to extend the vessels’ service lives beyond 2035. However, in 2019 the South African Navy indicated that no money is available for major upgrades, with the frigate upgrade currently in the concept phase only. The Navy in September 2019 reported it would cost R700 million to refit a frigate and R400 million to refit a submarine, with three frigates and two submarines requiring urgent refit. However, only R220 million has been allocated for refit of submarines and frigates between 2019/20 and 2022/23.
In 2019 the Navy indicated that all activities on the mid-life upgrade of SA Navy submarines under Project Napoleon was suspended due to the imposition of budget cuts.
Three inshore patrol vessels are being acquired under Project Biro. In early 2018 Armscor announced it had placed the order with Damen Shipyards Cape Town (DSCT) under a six year project (deliveries are expected between 2021 and 2023). DSCT is supplying three 62×11 metre Stan Patrol 6211 vessels, which have a maximum speed of 26.5 knots, a range of 4 000 nautical miles, and a crew of up to 62. The vessels will each carry one 7 metre long RHIB and one 9 metre long RHIB for boarding operations. DSCT laid the keel of the first IPV in February 2019, which is on track to be delivered in mid-2021. Steel cutting for the second vessel recently commenced.
Armscor expects the contract to be completed around December 2025, after it became effective on 11 January 2018. It is worth R2.471 billion, with R1.439 billion paid so far, although it could escalate to R3.63 billion.
In May Armscor said regarding risks to the project, the budget shortfall due to the reduction in the Strategic Capital Acquisition Master Plan (SCAMP) allocation after 2020/21 is “becoming a serious risk, as Armscor would have a contractual obligation to honour invoices during those years. No adjustment for inflation and ROE [return on equity] has been made since 2017 and require urgent correction.”
The South African Navy’s hydrographic survey vessel SAS Protea is being replaced under Project Hotel. In December 2017 Armscor announced that Southern African Shipyards (SAS – now Sandock Austral Shipyard) had been selected to build the new vessel. The first steel for the vessel was cut in November 2018. SAS is constructing the Vard Marine 9 105 design to meet the requirements. This is a 95 metre long ice-strengthened vessel with a 10 000 nautical mile range and top speed of 18 knots. Project Hotel also includes two fully integrated inshore survey motorboats and the upgrading of current shore-based hydrographic office infrastructure at Silvermine. The new vessel will cost an estimated R2.1 billion. Subcontractors on Hotel include Veecraft Marine, which is supplying the boats.
Armscor expects the project to be completed around August 2023 – the contractual completion date is November 2022. In May it said “The current funding deficit is placing the project at severe risk as the significant funding shortfall will coincide with peak production in FY2021/22.”