SA defence industry performance declined in 2016/17 – Armscor CEO


The 2016/17 financial year was, according to Armscor chief executive Kevin Wakeford, one in which there was “a significant and concerning decline” in the performance of the local defence industry.

He singled out government-owned defence and technology conglomerate, Denel, for not meeting contractual obligations as regards “the execution of critical projects”.

He goes on to say in the latest Armscor annual report that despite the negative impact of industry under-performance, the continued challenge of receiving requirements on time to contract and effect payments, Armscor achieved and exceeded its 95% cash flow target for capital and operating funds by “a significant margin”.
“This achievement is mainly attributed to a significant advance payment awarded on the Hoefyster programme and significant payments against the foreign component of the Ground Based Air Defence (GBAD) programme to offset under-performance by industry. While taking contracts into consideration for which cash flow could not be realised during the review period, due to external and excusable factors, Armscor continued the trend of the past six years by achieving cash flow in excess of 70% of adjusted ordered values.”

The 2016/167 financial year saw Armscor manage and execute contracts valued at R11.361 billion for the Department of Defence (DoD). Just over 60% of this, R6.84 billion, related to technology and capital acquisition projects with the balance going to procurement, maintenance and support contracts.

The value of capital acquisition contracts increased from R5.93 billion (51.6% of total portfolio) during the 2015/16 year to R6.85 billion.

Wakeford also notes Armscor’s newly developed shortened contracting process for the procurement of commercial and military off-the-shelf (COTS and MOTS) items is fully implemented. It resulted in “considerably shorter contracting times, evidenced by an average of 60 days turnaround time”.

The state’s defence and security acquisition agency is actively exploring business partnering as part of its turnaround strategy to ensure sustainability. Armscor’s research and development department earned 34% of the total business portfolio of R451.3 million from commercial contracts with the balance coming from the Department of Defence and Military Veterans.

Armscor’s test ranges – Alkantpan and Gerotek – and its Centurion-based Hazmat protective Systems operation contribute both local and foreign income, the annual report states, without giving any detailed breakdown.