Special Defence Account cut means fewer projects for Armscor


Armscor’s core function is the acquisition of defence materiel and related services primarily for the national defence force but this work will be “significantly decreased” with cuts coming to the primary source of defence capital expenditure – the Special Defence Account (SDA).

Briefing the Portfolio Committee on Defence and Military Veterans (PCDMV) at the end of November, Armscor chief executive Advocate Solomzi Mbada said the cuts to the Department of Defence (DoD)-administered SDA would see active funded projects drop to just 15 in the 2020/21 financial year. Armscor managed 39 SDA-funded projects in the 2019/20 financial year.

Projects are divided into two categories – technology and capital acquisition and procurement and maintenance support – valued at a total of R12 billion.

Technology and capital acquisition account for the majority – 65% – worth R7,7 billion while procurement and maintenance at R4,4 billion making up the 35% balance.

Main acquisition projects include Project Hotel, for a new hydrographic survey vessel, including two inshore survey motor boats and one sea boat, to replace the SAS Protea. Project Hotel also includes upgrading shore-based infrastructure. Project Biro is seeing the acquisition of three multi-mission inshore patrol vessels from Damen Shipyards Cape Town. Other major capital projects include the acquisition of the A-Darter air-to-air missile for the SA Air Force (production is behind schedule due to liquidity challenges at Denel, with manufacturing delayed by two and a half years) and the acquisition of new Badger infantry fighting vehicles to replace some Ratels under Project Hoefyster. This project is also delayed due to challenges at Denel.

During the 2019/20 financial year Armscor recorded R1.37 billion in revenue for the group and R494 million in revenue from its research and development business unit (R101 million from the DoD grant; R242 million from DoD contracted work and R127 million from commercial contracted work).

According to Mbada’s presentation, Armscor ensures strategic capabilities and facilities under its control grow in accordance with Armscor’s mandate and corporate goals. This includes defence operational and scientific research, test and evaluation services and technology management, analysis and innovation management services.

Other Armscor business units/facilities which generate revenue include the Alkantpan test range in Northern Cape; the Institute of Maritime Technology at Simon’s Town; Gerotek, west of Pretoria and Protechnik in Centurion.

Armscor said challenges it faced in the most recent financial year included a reduction in transfer payments; insufficient funding to service operating budget requirements of the Department of Defence (DoD) with delays in contracting effecting the industry; and supply risks from Denel and others.

“Armscor continues to deliver on its mandate despite difficult global and local economic conditions,” it said, and will carry on looking for partnership opportunities with the government, industry, leveraging on its intellectual property and assets through research and development technologies.

Armscor will intensify efforts to sweat properties; it owns including two at Erasmuskloof, one at Pretoria West and one in Northern Cape with the intention of generating revenue.