Project Hoefyster, for the supply of 243 Badger infantry fighting vehicles for the South African Army, is nine years behind schedule with little hope that the project will be turned around due to major challenges at Denel.
This is according to an Armscor presentation to the Joint Standing Committee on Defence (JSCD) on 11 March. Sipho Mkwanazi, Armscor acting group executive for supply chain management, told the committee that the first 88 vehicles were supposed to be completed by Denel Land Systems by May 2019, with service entry by 2022, but the project has been delayed by nine years (under original 2007 projections).
Production of 243 vehicles is supposed to be completed by March 2023, with the contract completion date of 30 November that year. However, industrialisation is presently 40 months behind schedule and development has not yet been completed, with very little progress being shown at present due to financial constraints at Denel, technical challenges to meet contracted performance, and significant loss of capability to complete development and industrialisation.
Badger vehicles are supposed to be delivered in five initial variants (Section, Mortar, Missile, Fire Support and Command) and five new variants (Basic Artillery Observation System, Artillery Tactical Command Post, Enhanced Artillery Observation System, Signal and Ambulance). However, at present, Armscor said development of hull and turret items common to all variants stands at 72% complete.
Development of the Section variant stands at 83%; the Fire Support variant at 83%; the Command variant at 72%; the Mortar variant at 44%; and the Missile variant at 53%. All work on the five new variants is on hold. Armscor said Denel is experiencing huge challenges with the mortar and missile variants.
Denel has a number of major challenges with the project as a whole. The Section variant Engineering Design Model has not been qualified and failed several functionality and performance tests at the Alkantpan Test Range in February 2018, and recently at the Overberg Test Range in November 2019. The other combat variants are further delayed.
Industrialisation of the Section variant is behind and continues to slip. This has particularly been affected by the liquidation of VR Laser, which means Denel Vehicle Systems must be industrialised to manufacture hulls and turret hulls in-house. Industrialisation is on hold due to parts shortages due to the non-payment of suppliers – suppliers are not prepared to supply Denel.
Another issue highlighted by Armscor is that landmine protection of the vehicle is still to be verified on a South African-built vehicle platform.
In terms of production, the delivery of the first 88 Badgers was supposed to be completed by May 2019. However, Denel Land Systems is not in the position to even start this phase, Armscor said.
During December 2018 Denel indicated in writing it could not complete the contract in terms of specification, cost and timescales. Denel further indicated that the contract will be loss-making; that it could not fully fund the completion of development, it did not have the operating funds to execute industrialisation; and it was unable to pay suppliers and subcontractors.
Denel also said it would not be able to absorb the penalties for late deliveries, and that Denel Land Systems would have to cover the warranty costs of the major components that were bought and kept in stock beyond the two-year OEM warranty period.
Denel requested that the contract be reset, and for Armscor and the Department of Defence to absorb escalation costs beyond the delivery dates, and waive penalties. Penalties are now beyond R200 million, Armscor said.
Denel maintained that development of the Section Variant had been completed and product baseline had been achieved. Armscor disagreed, saying there are a significant number of technical non-compliances that are not resolved.
“During August 2020, consensus was reached between Armscor and Denel regarding the number of non-compliances to specification. Denel was requested to review the technical non-compliance and provide Armscor with non-compliances which can be rectified by Denel,” Armscor said. Denel was also to provide new dates and implications for completing the Development Phase. “To date, Denel has not responded with any further information,” Armscor told the JSCD.
Looking at Denel’s financial situation and inability to pay and retain staff, Armscor is pessimistic about Denel being able to rectify the project, Mkwanazi told the JSCD.