Thales SA ups empowerment share and pushes export and non-defence business

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Thales South Africa, the local affiliate of the French listed defence group Thales, has upped its empowerment credentials and has plans to expand its use of local services and products. This will help better place the company in a position for more government business.

Justice Tootla, CEO of Thales SA, said the group’s use of local services and products will rise as the company takes on SA alternatives to some lines that are currently imported. The group recently began to use local firms as sub-contractors on maintenance and repair projects for the SA Navy.

A deal earlier this year with a women’s trust has expanded its black empowerment ownership to 51 percent of the company’s value. As a result of this deal the total black women ownership stake of the company is now 30 percent. Six years ago Black Economic Empowerment group Batsomi Investment Holdings, owned by Jacob Modise, led a consortium that took a 26 percent stake in Thales SA. In June this year a black women’s trust took a 25 percent stake in the company, thereby giving black South Africans a 51 percent stake in the company.

This makes the company an SA rather than a subsidiary of a foreign firm, and with a Level 2 B-BBEE rating gives it an improved procurement recognition for government business. Tootla said that raising the stake of local shareholders to 51 percent will allow the company, “to grow and become more agile.”

According to Tootla, Thales SA currently has an annual turnover of around R1 billion. Growth in turnover and earnings have been “nice and steady”, but in single digits, over the past few years, said Tootla.

Up until recently the group’s breakdown of turnover consisted of 80 percent from the defence sector and the remainder from air traffic management equipment sales.

The low growth in the SA defence budget means there is now pressure on sales in this sector and the company has had to try and obtain more export and transport sector business. This has forced Thales SA to look to sales to the Middle East and a growth in air traffic navigation and transport systems for growth.

The company employs 160 people in SA, most of them at its offices in Midrand.

Despite the low growth in the SA sector, defence sales remain the company’s core businesses. Thales SA is positioning itself for the SA Air Force Project Chutney to acquire new ground based radar systems. It would offer the Thales Raytheon Systems Ground Master 400 radar (GM 400), or the mid-range GM 200 system. It is too early to decide on a local partner for Project Chutney, but Tootla said Thales SA is talking to Denel and Reutech.

Legacy defence contracts, including maintenance of the SA Navy frigate combat suites, continue to provide a source of revenue.

The company manufactures naval consoles at its plant in Midrand and is interested in providing these as part of Project Biro, the Navy’s plan to acquire six new patrol vessels.

Thales has sold the Scorpion automated mortar and fire control system to the South African National Defence Force (SANDF), and is now marketing this to other African countries. Another local project includes the sale of TACIS (Tactical Intelligence and Surveillance Systems) for border surveillance and the fight against poaching in the Kruger National Park.

Thales SA is now looking for export opportunities for the AS 400 artillery fire control system, which was supplied to the SANDF under Project Klooster. The system was supplied to the United Arab Emirates three years ago and is now being marketed more widely in the Middle East, said Tootla.

Thales SA is also producing components for the Combat Management Systems for the joint French-Italian FREMM multi-mission frigate programme. It will also provide the software to link the radar systems with on board guns.

The strongest recent growth for Thales SA has been in the transport sector, said Tootla. It has a R1.8 billion five-year contract to provide a signalling solution on rail lines in the Western Cape from the Passenger Rail Agency of South Africa (PRASA).



It has also been awarded a contract by Gautrain to upgrade its ticketing and payment system. Another recent non-defence contract involved an upgrade to SA Air Traffic and Navigation Services (ATNS). The company has also provided air traffic management systems to Namibia, Mauritius, and Kenya, and was recently awarded a contract by Egypt for the replacement of air traffic management systems.