According to a draft Defence Industry Strategy document, the primary purpose of South Africa’s defence industry is to give the country a measure of strategic independence and freedom of strategic action but it needs government to focus on developing the “indigenous industry to avoid subjugating South African interests to those of other states”.
The more the 200 page document, compiled by the National Defence Industry Council (NDIC), is currently circulating for comment and input. It makes the point that acquisition for the SA National Defence Force (SANDF) and other security agencies, including the SA Police Service, will “insofar as is practicable” give preference to local companies. This applies not only to the actual acquisition but also the support and sustainment of key defence capabilities as part of the cradle to grave concept.
According to the 2015 Defence Review, compiled and completed in 2012 by a team led by Roelf Meyer, there are three classes of what can be considered South African companies operating in the local defence industry.
Top of the list are companies with 51% South African ownership as well as local executive management and facilities preferably in the country. Next up are partly South African owned companies where the local ownership percentage is 26%, they have South African executive management and again, facilities are preferably located in South Africa.
The third class of defence industry company is South African based with foreign majority ownership and local facilities under the control of South African staff. This, the document states, is required to ensure uninterrupted supply to the SANDF as well as an acceptable agreement ensuring security of South African intellectual property. Companies in this category must “demonstrate a real, tangible and enduring commitment to adding economic value in South Africa and skills development in the country”.
The document wants to see the three classes of companies “enjoy, in descending order, preference over foreign companies for defence contracts” with the proviso that performance and quality of products and pricing is comparable.
It does not prevent joint ventures or taking on foreign companies as equity partners by South African companies provided the ownership profile does not change and there is no security or intellectual property rights infringement.
Foreign companies with “no more than a marketing or representative office” in South Africa are expressly precluded from any preference over other foreign companies bidding for South African defence contracts or work.
The document stresses it is only a draft and remains subject to change following inputs received during “further consultation and the public comment phase”. A contact name, email address and telephone number is given but repeated attempts by defenceWeb resulted only in “undeliverable” in the case of email and no answer when the number was dialled.