As Minister of Defence and Military Veterans you have stated in the budget debate that you would like to spread the net wider for pragmatic recommendations for the modernisation of the SANDF. As minister you have indicated that you would like to include recommendations from the local defence industry.
The Secretary for Defence has been tasked with developing “an affordable level of defence ambition cognisant of funding challenges and emerging real and tangible threats to national security”.
Similarly, the incoming SANDF Chief has been tasked with a “blue print force design”. As minister you have stated that “The command and staff structure of the SANDF will have to change if we are to ensure improved efficiency and effectiveness in future. To this end, we should focus on implementation as soon as is practically possible.”
The current budget is R47 billion (0.86% of GDP), and the ministry bemoans the reduction of R15 billion. Can we take it that the ministry believes that R62 billion (1.15% of GDP) in 2021 year value is the baseline for a future structure?
Current norms highlighted in the 2015 Defence Review using a 40:30:30 spending allocation would then indicate 40% (R25 billion) for Personnel, 30% (R18.5 billion) for Operations, and 30% (R18.5 billion) for Acquisition.
If the ministry wants an innovative approach try the 45:55 spending allocation. 45% (R28 billion) of the budget is allocated to the defence force for personnel and facilities. A reduced personnel component of Regulars, Reserves and Defence Civilians could be applied as certain functions are transferred to the defence industry. 55% (R34 billion) is applied to guaranteed, fixed hour based operations based on simplified contracting mechanisms, which includes the supply of the support component for the main equipment.
The Special Defence Account (SDA) fund is being reduced and/or phased out. This opens the opportunity for industry self funding for capability supply, or even future Public Private Partnership (PPP) opportunities. The acquisition component can be integrated with the operating component for Total Life Cycle capability contracting. The Capability Supply investments are based on long term supply contracts. The challenge is convincing suppliers/investors to allocate funds. This is achieved by agreeing long term minimum use fixed contracts.
Below are seven initial areas of industry investment for guaranteeing minimum operating availability in the defence capability. Each of these has the capability to unlock investment of between R10-15 billion per sector for establishing local capability. This is possible if each sector is allocated around R5 billion guaranteed yearly on a contract basis going forward. The benefit for the Ministry of Defence and Veterans is that this aligns with Minister of Trade and Industry goal of allocating R200 billion for localisation over a five year period. Aerospace and Defence can then start to assume an apex ecosystem role.
Entrepreneurial Mindset Required
The South African A&D Industry has the capability to supply and support the following core areas of a future defence capability.
The key element is to find a South African owned entrepreneurial entity to lead each sector. I have proposed a current sector entrepreneurial entity as co-ordinating Head Company. This entrepreneurial entity would work with the Secretariat of Defence and the SANDF in an Integrated Sector Team approach to gain maximum value for funding. A single entity from the sector leaders could act in the role of entrepreneurial sponsor over all seven sectors. The entrepreneur sponsor interacts with the sector teams and government entities to co-ordinate across sectors in order to maximise opportunities for suppliers across sectors. Is there an entrepreneurial sponsor that is willing to take up the reins?
As a contracting condition of this approach, each sector has to allocate a minimum of 2.5% of annual defence operations allocation to R&D (R850 million). The Integrated Sector Teams are to work in conjunction with the entrepreneurial sponsor, CSIR and the Department of Trade and Industry for co-ordinating future beneficial technologies.
The benefit of this entrepreneurial investment approach is that South Africa is able to unlock future defence and commercial export revenue in a short timescale and increase contribution to GDP:
1. Connected Forces for Rapid Reaction: This encompasses the Level 5 integrated C4IRS capabilities using the Level 3-4 suppliers in the well established Electronics industry, as well as the new burgeoning UAS and Space domains. The AI and Machine Learning future environments can be catered for in this segment and rolled out to other segments below.
Global Command and Control Technologies (GC2T) – Future Land Battle Management Solution & Border Management Agency Integrated Solution & Coastal Surveillance Solution & Air Defence Surveillance Solution, as well as a future Defence Intelligence System.
2. Air Lift Capability: There is an opportunity to leverage the Aerospace industry in the Regional Air Mobility (RAM) domain through targeted defence applications. The Centurion Aviation Village could use the RAM potential to develop into a large market that should warrant dedicated exploration alongside other related applications such as Unmanned Aircraft Systems (UAS) and Urban Air Mobility (UAM). This can be expanded to offer programmes for the Oryx and the Cessna Caravan replacement from the local industry.
Aerosud – Fixed Wing Medium Lift guaranteed Hour Solution, Rotary Wing Medium/Heavy Lift guaranteed Hour Solution, as well as Local developed 14-19 seat Rural Mobility Aircraft & Heavy-Lift Cargo UAS
3. Close Air Support: The SANDF has a need for air cover when deployed. The local A&D industry has the capability to offer various manned, remotely piloted, and even future autonomous systems in this domain.
Paramount Advanced Technologies – Guaranteed Hour (incl fuel) Gripen, Hawk, Rooivalk, Oryx, A109, PC7 contracts with guaranteed minimum flight hours per annum, as well as Future Rooivalk MkII (with common future Oryx replacement powertrain) & AHRLAC/Mwari & UAS Systems.
4. Sea-Landed Capability: The sea-landed capability supply by SADI is a stretch goal. This is required by the SANDF for regional force projection, and it offers expansion of capabilities in line with the Operation Phakisa goals. The requirement is that a South Africa design house has to provide the future sea-landed vessel design. Thus this needs to have a mature acquisition entity that does not require proven design that inherently excludes the local option.
Sandock Austral – Full industry upgrade and support contracts for Support Vessels, Hydrographic Vessel, as well as Future SA Landing Platform & Future Support Vessel.
5. EEZ Patrol and Fire Power Capability: The MMIPV and Hydrographic Vessel Projects have established a basis for larger vessel supply, but we are not yet fully local on the platform basis of design. The MMOPV project needs to include the requirement that a South Africa design house has to provide the design. This would bring the larger vessel capability in line with the well established boat and small vessel supply capability.
Paramount Maritime – Transfer Simonstown Dockyard Maintenance capability to Industry Consortium. Full industry upgrade and support contracts for Frigates, Submarines, MMIPV & In-shore boat compliment, as well as future MMOPV.
6. High Mobility Infantry Capability: The SADI vehicle segment can be seen to be competing with the world leaders. Future Infantry mobility acquisitions for SANDF need to be local designs for the full system. The Infantry Fighting Vehicle programme missed a trick when it did not progress with the local vehicle solutions that were designed for Armscor as a R&D project.
OTT – IFV Capability Contract, initiate the future Support Vehicle, Motorised Infantry Vehicle, standardised light mobility, Hornet and Gecko replacements.
7. Enhanced Fire-power, Manoeuvre and Protection for Landward Forces: Various projects are available. The LEO 105mm is highlighted in A&D Masterplan and is an example of the potential within this domain. These product systems stimulate the related ammunition domains.
DCD Protected Mobility – Industry support contracts for full range of SANDF weapons in new force structure, as well as look into future Demining Vehicles, LEO mobility & Umkhonto GBADS.
There are numerous opportunities, Minister. The Greek god of Opportunity, Caerus, is described as the god that brings about what is convenient, fit and comes at the right time.
Minister, you ask “What kind of defence force should South Africa have and what can it afford?” while it “must ensure future relevance and the ability to sustainably execute selected priority missions, perform core-mandated functions and provide value to South Africa as a developmental state.”
I would like to be so bold as to suggest that the mantra of the Ministry of Defence and Military Veterans, as it is seeking to reposition the SA Defence Capability should be: Re-establish a base that is convenient, fit and comes at the right time.
Is this entrepreneurial entity approach “a pragmatic, affordable and focused response”?
The South African Aerospace and Defence industry is waiting for your guidance.
Written by James Kerr, Orion Consulting CC, which provides Market Entry Strategy and Bid & Proposal services to the Aerospace & Defence related industry and assists international SME mission system product suppliers to gain traction in South Africa. Kerr has assisted various companies to enter, or expand footprint in, the defence industry with air, land and naval systems. He also served as a navigator, and completed an engineering degree, while in the South African Air Force for 13 years.