Further consolidation needed in defence ICT industry

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The size of the market does not justify the number of companies in it, says Saab Grintek.The South African defence ICT industry must further consolidate if it is to survive in a cut-throat globalised environment, says Riaz Saloojee, head of defence business at Saab Grintek.

It also needs clearer strategic guidance from government in the form of an update of a 1999 defence industry white paper and a change of emphasis from platforms to systems. “A reprioritisation is necessary,” Saloojee, a former South African Air Force brigadier-general says. “Industry needs a transparent view of the future”.

The industry comprises 74 companies with a turnover of R10.1 billion. While there is a fair share of metal-bashing, 49.8% of the industry falls into the ICT rubric. SA is one of nineteen countries with a substantial domestic defence industry.

Defence IT companies have suffered significantly in recent years. Saloojee says the penny is now dropping that SA`s military information infrastructure needs urgent attention or otherwise the country`s defensive capability will be reduced to “a nice collection of parked aircraft on the flight line.” The communications infrastructure, he adds, is “nearly obsolete”.

Technology has progressed and with it has the state of the art in warfare. So-called “net-centric warfare” allows countries the most efficient use of diminishing resources in the pursuit of their international and national defence obligations. “‘Joint operations` is not yet a fully developed concept in this country and the key to ‘jointness` is breaking down the ICT stovepipes between the services (army, air force and navy) as well as moving from a platform-centric to systems approach,” Saloojee says.

He argues the country`s multibillion rand defence acquisition programme that saw it buy Gripen and Hawk fighters, helicopters, frigates and submarines reflected a platform approach as little has been done to integrate these platforms into a “system of systems” that allows the Gripen fighters to pass radar images to the frigates or to an anti-aircraft battery and vice versa.

International alliances

Returning to the theme of consolidation, Saloojee says the key is international alliances and partnerships that allow one to exploit local intellectual property abroad. “Six years ago Saab Avitronics was a small South African company with a turnover of R70 million a year, employing about 80 people. Since partnering with Saab, markets opened and it is now a R450 million a year company with more than 400 employees.”

Saloojee adds Saab Grintek is looking at consolidating in the military communications environment. The recent purchase of Thales Advanced Engineering brings the Link ZA technology into the stable with an eye on adding other technology to the SAAB Grintek stable.

The command and control environment is also “hotly contested”, with several companies competing for existing or pending SANDF contracts. “Whoever wins has business for the next 30 to 40 years, but current spending does not justify the existence of three or four players,” Saloojee says.

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