Peacekeeping and border security to drive SA defence procurement – report

5054

Peacekeeping commitments, border security challenges and homeland security requirements will drive South Africa’s defence procurement over the next five years, according to a new report, which says that South Africa will see the acquisition of items such as naval vessels, C4ISR systems, aircraft and infantry fighting vehicles.

The report by Strategic Defence Intelligence, entitled Future of the South African Defence Industry, notes that South African military procurement will be in line with national security priorities, including border security, antipiracy and maritime security, and, the protection of the nation’s and the country’s resources. Moreover, the South African National Defence Force (SANDF) is an active participant in stability and peacekeeping operations and has been involved in a number of peace-building missions in the Democratic Republic of Congo, Darfur, Central African Republic and Burundi.
“South Africa is also facing severe border security challenges and is expected to undertake strict measures to curb illegal immigration as well as illicit movement of goods and arms. This is set to encourage the government to increase its defence budget from US$4.2 billion in 2015 to US$4.9 billion in 2019. On a cumulative basis, defence budget is projected to be US$22.9 billion over next four years, compared to US$21.7 billion incurred between 2010 and 2014,” the report notes.
“South African equipment modernisation plans will drive an increase in the capital expenditure budget from US$729.3 million in 2014 to US$1.1 billion in 2019. The military is likely to invest a considerable portion of its capital expenditure budget for the enhancement of its naval capabilities,” the report notes, such as through procurement of new offshore and inshore patrol vessels. The government will also focus on other prime areas, such as aircraft, armoured vehicles and surveillance and reconnaissance systems. “Revenue expenditure, which includes staff salaries, training expenses of soldiers and maintenance costs of defence facilities, is forecasted to reach US$18.4 billion over 2015-2019,” according to the report.
“The army budget was valued at US$332.7 million in 2010, which decreased to US$206.9 million in 2014 at a CAGR of -11.19%. However, over the forecast period [2015 to 2019], the army budget is expected to grow from US$218.7 million in 2015 to US$294.3 million in 2019, reflecting a CAGR of 7.70%. The growth in army expenditure can be attributed to modernisation programmes and a number of procurement schedules that will be executed over the forecast period. The budget for the navy and air force is expected to grow at a CAGR of 23.69% and 7.04%, respectively.
“Despite being relatively small, many foreign companies are willing to enter the South African defence market. The most preferred way to establish presence within the market is through joint ventures and collaborations with domestic firms. The South African government encourages joint ventures and partnerships as these deals enable the transfer of technology and allow domestic firms entry into the global supply chain, thus supporting long-term investment into research and development. Companies as Saab AB and Rheinmetall AG are the examples of foreign manufacturers that have entered into joint ventures to cater the South African defence market,” the report says.

On the homeland security side, the report said this budget will be driven by the increasing crime rate and rising threats from terrorism, with the budget is expected to increase from US$7.1 billion in 2015 to US$9.1 billion by 2019 at a CAGR of 6.25%.

Regarding challenges to the industry, the report said corruption, a relatively small market size, mandatory minority stake, and a lack of strong defence policy act as the prime roadblocks for the industry.