Saudi Arabia has approached South Africa about taking a stake in struggling state-owned defence firm Denel, the African country’s foreign affairs minister Lindiwe Sisulu confirmed on Thursday.
“There have been overtures by Saudi Arabia to buy a stake in our ailing Denel. I do not know what the outcome of those negotiations will be when it gets to the NCACC (National Conventional Arms Control Committee),” she told a briefing.
The committee would consider the merits of the potential deal, including human rights considerations, she added.
Saudi Arabian Military Industries’ (SAMI) chief executive Andreas Schwer told Reuters last week that Saudi authorities were in talks about a possible stake in Denel.
South Africa’s defence industry once played a major role in its economy, but has suffered from the impact of a squeeze on defence spending globally and a weak home market.
Saudi Arabia is the world’s third largest defence spender behind the United States and China with an estimated military budget last year of nearly $70 billion.
Earlier reports hinted that Saudi Arabia would invest $100 million in Denel.
Andreas Schwer, the head of the Saudi state defence company Saudi Arabian Military Industries (SAMI) earlier this month told Reuters that “we are in discussions with the South African government in order to identify opportunities to set up strategic partnerships which could include an equity investment from our side into Denel. It’s not decided yet, but it’s one option.”
President Cyril Ramaphosa met with Saudi Arabia’s King Salman bin Abdulaziz al Saud and Crown Prince Mohammed bin Salman in Riyadh in July, and announced a massive trade and investment package.
SAMI is in discussions with other South African companies including Paramount. “To make it clear, we are in discussions with all major South African companies, not only Paramount, not only Denel,” Schwer told Reuters last week.
Denel is in urgent need of financial assistance as a major cash shortage means it may not be able to pay salaries this month. Full salaries were not paid to senior personnel in September.