RDM feeling pressure from NCACC decision on export permits


Rheinmetall Denel Munition (RDM) along with the entire the South African defence industry is feeling the pressure from the National Conventional Arms Control Committee (NCACC) last year halting export approvals to South Africa’s biggest military clients, Saudi Arabia and the United Arab Emirates (UAE).

The NCACC is demanding that it be allowed to inspect customer countries’ facilities to verify compliance and that these countries must sign end user certificates (EUCs) whereby they pledge not to sell their weapons to third parties.

Saudi Arabia and the UAE have rejected the inspections, stating it is a violation of their sovereignty. Saudi Arabia and the UAE have been importing significant amounts of South African arms since the early 2000s according to the United Nations Register of Conventional Arms (UNROCA) and the Stockholm International Peace Research Institute (SIPRI). In 2016 the UNROCA reported 120 large calibre artillery systems exported from South Africa to the UAE. From 2015 to 2018, SIPRI reported 1 320 precision guided bomb kits from Denel Dynamics, 100 N35 armoured personnel carriers (APCs) and 24 RG-31 Nyala APCs from Land Systems OMC delivered to UAE with an unknown number of Seeker-200 unmanned aerial vehicles (UAVs) from Denel Dynamics on order. Additionally, 60 LM13 APCs from LMT and 10 Casspir-6s were exported to Saudi Arabia from 2015 to 2018.

The problems with the UAE, Saudi Arabia and other customers refusing to sign the EUCs has meant much of South Africa’s arms exports ground to a halt. In response, after much consultation and deliberation, the NCACC at the beginning of February said it had amended end user requirements as follows: “It is agreed that on-site verification of the controlled items may be performed through diplomatic process.” This replaces the original wording “It is agreed that on-site verification of the controlled items may be performed by an inspector designated by the Minister in terms of Section 9 of the Act.”

The NCACC said the amendment is to replace on-site verification through an inspector designated by the Minister. However, the amendment to the End User Certificate must still be promulgated in the Government Gazette “and this will be done as soon as possible.” The NCACC added that permission had been sought from the Minister of Defence to use the above text in the interim.

In the meantime, the industry continues to experience challenges. For example, RDM have reported that due to this ongoing export issue they have already lost sales, with turnover dropping more than 50% in the last financial year due to the NCACC issues. The Middle East accounts for 70% of RDM orders. The result is that RDM has had to start retrenching staff and South Africa’s reputation as a dependable arms supplier is rapidly deteriorating. The company’s current staff level is currently just over 2 000.

“The entire South African Military Industry is feeling the pressure, not only RDM,” the company said.

The Aerospace, Maritime and Defence (AMD) industries association last year said the export blocks put an additional R50 to R60 billion in future business at risk and could cause the loss of up to 9 000 jobs at defence firms and supporting industries.

This piles extra pressure onto RDM which was hurt by a deadly explosion at its Somerset West facility in September 2018. Electrostatic electricity suspended in a graphite cloud was identified as the cause of the explosion and RDM have taken all the learnings from the investigation into account and appropriately modified some of their operations. It was emphasized that the specific operation that was being conducted at the time of the explosion has safely been done for 30 years without any incident.

An investigation team concluded that the cause was a combination of human error. The final decision on whether anybody should be held accountable for the incident rests with the National Prosecuting Authority (NPA), RDM said.

RDM has begun a new plant design plan for the Somerset West facility. Whilst replacement facilities are constructed, RDM will continue to use a temporary site until September.

RDM contributes almost 10% (200 million euros) of turnover to the Rheinmetall Group, although this has fallen slightly due to the 2018 plant explosion and issues with the NCACC over exports. Nevertheless, RDM says it remains “a sterling company in the Rheinmetall Group of companies. RDM nevertheless delivered unprecedented growth in sales and profits and continues to be a shining star in respect to market performance, good governance, increasing shareholder value and driving innovation.”