The imminent departure of Denel’s chief executive provides an opportunity for radical measures including merging major components of government-owned defence industry agencies and companies.
A merger between Denel and Armscor will result in at least three speedy benefits according to Democratic Alliance (DA) shadow ministers Kobus Marais (defence and military veterans) and Ghaleb Cachalia (public enterprises).
These are: reduced overheads and operating costs – by at least 50%; a streamlined management and executive structure; and the support of the private defence industry sector as true strategic partners in the protection and defence of South Africa’s territorial integrity and its people.
They see these three considerations as needing to be front of mind in view of Danie du Toit’s sudden resignation.
“This will avoid a repeat succession of chief executives continually set up for failure. The failure lies not with the competence of people like du Toit but with the structural failures and market challenges Denel finds itself in,” they said.
“If issues are not addressed this sorry state of affairs will continue and the country’s strategic interests will become compromised,” they warn adding “radical measures (an Armscor/Denel merger) need to be implemented without delay”.
Looking at possible reasons for Du Toit’s departure less than two years after taking up the position, Marais and Cachalia point out his background, credibility and track record of proven competence to turn around struggling companies and to put them on a sustainable trajectory was never in question.
“In the absence of reasons why he suddenly resigned one can only deduce he realised the impossibility of Denel delivering. The realisation Denel will not be a sustainable business unit reflects a tragic state of affairs,” they said.
Marais points to the ongoing saga of the new infantry combat vehicle – Badger – for the SA Army Infantry Formation as a prime example of Denel failure.
“The replacement of the Ratel with the all new Badger is Denel’s largest project and is under serious threat of cancellation by the SA National Defence Force (SANDF). It is reported that Denel is 45 months behind schedule. Phase 1 of the project is not completed. Clearly Denel does not have the financial means to complete this project on time exacerbated by the phasing out of the Strategic Defence Account (SDA) and drastic cuts in the defence budget over the medium term. The national defence force itself appears to be unable to further afford Project Hoefyster. With a dwindling defence budget, restructuring and reprioritising of the SANDF’s role is an urgent matter to secure compliance to the prescripts and requirements of the Constitution,” he said.
Both Members of Parliament maintain “Denel in its current form and previously as part of Armscor is strategically important to the SANDF and alternatives must urgently be considered to retain strategic capabilities for the defence of South Africa’s sovereignty on land, in the air and at sea”.