Both government and the South African defence industry have agreed on the need for a dedicated fund to act like a bank for the industry. This emerged during the recent South African Aerospace, Maritime and Defence Industry Association (AMD) 25th anniversary roundtable conference.
Addressing government members, defence industry players and members of the media at the CSIR on 8 June, AMD Executive Director Simphiwe Hamilton said South Africa needed a dedicated Defence Industry Fund. The decision, he said, had been made on the official level and Armscor has been mandated to set up the fund.
He said there were two primary reasons to create the fund. The first was getting the necessary funding for the DoD to get past its current state and arrest the decline of the SANDF. The second one would be to place the fund on sound business principles.
In relation to the Defence Industry Fund Hamilton welcomed all ideas on how to create this kind of institution. He pointed out that all financial institutions considered military business to be a high-risk operation, so a dedicated fund was needed.
He said on many occasions the South African Defence Industry (SADI) has lost contracts, because, for example, Zambia, Angola or Mali, who were looking to modernise their armed forces with various technologies, would turn to Russia, America or China because these countries could provide finance mechanisms for acquisitions.
He drew a parallel between buying a car and buying military hardware. Most people, he pointed out, could not afford to buy a new car with cash, so they needed outside financing. So if a potential buyer needed financing to purchase a South African made product, this way the Fund could provide loans to the buyer as well as help finance manufacture by a South African company.
Former AMD Chairman Dean Mogale stressed that the fund would operate on normal business principles and pointed out that Armscor’s decision to award the contract would impact on the planned fund and vice versa.
Among other problems, members of the panel raised the difficulty between identification of a technology in the field (e.g. by Chief of Joint Operations in a UN peacekeeping mission) and the delivery of the item to the field.
Part of the problem was that the services still do the acquisition process for their needs as separate services rather than with joint planning in mind. This slows the process.
Another speaker at the roundtable, independent military expert Helmoed Römer Heitman, said it was acceptable to give AMD a “pat on the back” as the industry had achieved successes that were “remarkable” in a small industry and small country like South Africa.
“Having a South African-developed air-position sensor in all the Gripens and all the Eurofighters around the world is unequalled.” He said having a sub-system that important from a country as small as South Africa was extremely rare.
This was a reference to the Cobra Integrated Helmet Mounted Display (IHMD) system developed by SAAB, BAE Systems and Kentron.
He added South African-manufactured periscopes, radar and radar warning systems belong in the “top end of the league”. Norway turned to South Africa to develop a new radar system, something that countries tended not to do. He said that “the Americans, who hate buying anything that isn’t made in America, buying 1000-plus Huskies” was no small feat.
Heitman mentioned good South African sales of small arms around the world as well as Electronic Warfare (EW) systems in European aircraft. He said the UAE was happy with using its Seeker unmanned aerial vehicles (UAVs) in Afghanistan and Finland was “exceedingly happy” with its Umkhonto surface-to-air missiles and was looking to buy more, while Sweden had selected the missile, but didn’t currently have the money to buy it.
Heitman pointed out that these countries don’t have to buy from South Africa. He reminded the audience of the old Armscor motto: “Deliver 80 percent of the performance for 60 percent of the price.”
He said people sometimes overlook small successes. Referring to a Price Waterhouse study on the Rooivalk, exports of subsystems were worth double the price of the helicopter by the end of 2013.
“The industry’s been doing some really interesting stuff with very limited funding,” Heitman said. These included the G7 105 mm gun, the Cheetah counter-rocket, artillery and missile system and UAVs.
He stressed the Department of Defence had not given sufficient funding for development or further development of systems, and the South African National Defence Force needed to buy SA products. He said: “If we don’t put it into service, we’re not going to be able to export it.”