Carl Zeiss Optronics takes Denel stake

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More foreign direct investment looms for SA`s embattled state arms-maker.German technology house Carl Zeiss Optronics is to take a majority share in the optronics division of SA`s loss-making arms manufacturer, Denel, raising fears of taxpayers subsidising the acquisition of its technology base by foreign companies.

An agreement signed this month will lead to detailed negotiations, which could lead to Zeiss taking a 70% stake in Denel Optronics.

“Negotiations are currently under way and, if successful, the acquisition is expected to be completed in the first quarter of 2007,” Denel said in a statement.

Zeiss Optronics manufactures a range of edge semiconductor and optoelectronic technologies for use in life sciences, health and eye care, as well as industrial, security and defence applications. Denel Optronics` product portfolio comprises laser rangefinders, target acquisition systems, submarine periscopes, and stabilised electro-optical systems for surveillance and targeting.

Denel Optronics is a wholly-owned subsidiary of Denel. The sale, part of Denel CE Shaun Liebenberg`s ongoing effort to restructure the parastatal, is part of a strategy to tie the company`s niche strengths to global players in the relevant industry segments, a move he sees as necessary for Denel`s survival in the defence business.

Denel last week announced another loss-making financial year, posting a deficit of R1.3 billion on gross revenue of R2.7 billion. It lost R1.5 billion the year before.

Foreign takeovers

To critics, the sale is the latest in a series that has seen foreign companies buying up local competition, often for a song.

Neither Zeiss nor Denel attached a value to the transaction, but last month the Competition Commission approved the sale of a 20% stake in another Denel subsidiary to Saab of Sweden. In that case, Saab undertook to provide an “investment of R66 million over the first two years, ongoing skills and technology transfers, as well as management and marketing access”.

According to a May press release, the investment gained R16.4 billion for Saab in offset credits – part of the R110 billion in defence industrial participation and other investments promised to SA in 1998 as part of a major arms deal.

Richard Young, the IT developer who first raised questions about the arms deal, said it was certain Zeiss would be able to claim similar credits for its investment.

“Offsets, especially the NIP (national industrial participation) is real smoke and mirrors stuff. It is meant to be the equivalent of hard cash, but with NIP they get all these marketing credits and multipliers that no one else can work out,” Young said.