The South African defence industry has not been affected by the COVID-19 pandemic like the aerospace sector has and could double exports within 12 to 18 months, according to the Aerospace and Defence Masterplan.
The document, published at the end of 2020, states that it is clear that – unlike commercial aeronautics and maintenance, repair and overhaul (MRO), which have been highly constrained by the impact of COVID-19 on the global industry – and unlike the space, which is at the very beginning of its production life cycle – the defence industry can double high value exports within a 12 to 18-month period.
The industry has an order book valued at over R20 billion and potential to increase exports quickly of competitive products and services within a 12 month period, with a further R60 billion within 60 months, the Masterplan states.
For 22 export ready products, seven can be ready to export in six months or less with projected revenues in the order of R3.6 billion within six months, and just over R42 billion between seven and 60 months, with the majority in place by 25 to 30 months.
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The Masterplan identified a number of defence export opportunities. This includes artillery ammunition (Rheinmetall Denel Munition has become a supplier of choice for 155 mm and other munitions and this is an export market that will continue to expand); electronic warfare equipment (e.g. via GEW); armoured vehicles (South Africa has a reputational edge in this area); airborne sensors; laser rangefinders; submarine periscopes (Hensoldt Optronics); optronic/radar trackers (already fitted to SA Navy vessels and exported by Reutech); coastal/air border surveillance radar (Reutech systems in service in South Africa and overseas with good further export potential); command and control systems (such as through Global Command and Control Technologies); and submarine periscope simulators (Cybicom Atlas Defence). Over the next five years, these sectors could generate tens of billions of rands.
A number of products are not export ready but could be ready for export within six to 60 months and this includes a navigation radar intercept sensor (a low-cost naval intelligence system that enables a patrol vessel to identify and locate radar signals that, if not matched by a ship identification signal, indicate likely illegal activity); a naval command and control system; naval maritime domain awareness system; low cost ground border surveillance radar (developed by Reutech with experience from use in the Kruger National Park); 3D air surveillance/defence radar (for surveillance and missile guidance); and a helicopter hostile fire indicator (being developed by the CSIR).
The Masterplan cautions that delivering on these opportunities requires the relevant skills are retained; the capacity to deliver exists; and there is sufficient funding available in the Special Defence Account or commercially for the most critical Department of Defence projects to be implemented.
Billions of Rands worth of equipment and products have been produced and are ready for export but are stuck due to red tape, although this is being addressed. “The current system of processing applications and decision-making regarding export permits and licenses is under resourced and not optimally structured for such processing and decision making. When compared to international best practice, in the UK for example, the South African system is not transparent and needs to be automated. In the UK system, the number and nature of permits is reported monthly online, and the process or authorisation takes a maximum of six weeks in 98 percent of cases.”
Denel is a concern as the time taken to resolve its financial problems has resulted in a loss of advanced skills, the shelving of otherwise potentially profitable projects built on competitive strengths, and a perception of execution risk which increases the cost of finance and decreases propensity to invest.
The Masterplan sees potential in the localisation of defence procurement. “South Africa has invested over R1 billion in the development of the technology blocks for products and sub-systems over the last ten years yet has procured items which can be produced locally from international suppliers. For example, South Africa has purchased critical items from overseas which arguably in some cases, could have been made locally. Where manufacturing capability does not exist, MRO work, which is labour intensive, can be localised. In the case of the South African Navy for example, frigate anti-ship missiles are currently sent to France for maintenance even though the MRO capability exists in South Africa. Such arrangements can be confirmed in the acquisition stage. The procurement process will require revision to ensure this leakage does not occur in the future. Small arms and ammunition, restocking of army ammunition, handheld radios, and turrets, represent some of the important and immediate manufacturing opportunities for localisation through designation.”
For more on this subject, consider attending the Aerospace and Defence Masterplan webinar on 25 May, brought to you by SAAMDEC and defenceWeb.