The South African defence industry is at a critical crossroads due to challenges including the reduced defence budget and fewer acquisition programmes, requiring transformation. This is according to defence minister Nosiviwe Mapisa-Nqakula.
The minister was speaking at the 2018 Aerospace, Maritime and Defence (AMD) conference on 18 September in Pretoria.
She said the industry’s challenges included the declining defence budget and consequently reduced spending on the acquisition of defence capital acquisition needs as well as reduced spend on research and development; lack of transformation; constrained access to funding to fulfil contracts; and internal challenges including the crisis as manifested in Denel and the fact that a number of companies are in business rescue.
Mapisa-Nqakula said there is “increased competition even from partner nations resulting in reduced market access and erosion of capabilities as some of our engineers migrate to serve the defence industrial aspirations of other nations. This is inclusive of emerging defence industrial nations in the Middle East and South East Asia all of whom will soon be direct competitors with the SADI [South African Defence Industry].”
The minister cautioned that “all of the above challenges will not be made easier by the recent announcement that the country has entered into a technical recession.”
She said that these challenges need “us to ensure that we all recommit ourselves to engaging with the industry in an effort to find meaningful and impactful methods of intervening where necessary as well as supporting where required.
“It cannot be business as usual. The industry has to transform…We have to better manage our resources and process to optimally ensure localisation, industrialisation and retention of capabilities within the SADI as well as to get full government support for SADI exports.
“As Minister I have commenced this process of repositioning the SADI by mandating the establishment of NDIC [National Defence Industry Council] whose structure is currently being costed so that funds can be sourced so that it can operationalised. Emanating from the work of NDIC, you will be aware that we have completed the compilation of the SA Defence Industry Strategy and are now finalising its Implementation Plan which will be adopted before the end of this year with implementation to commence soon thereafter.”
The minister said that Armscor and the Aerospace, Maritime and Defence (AMD) Industries Association of South Africa have overseen the development of a SADI BBBEE Charter as well as the creation of the SA Defence Industry Fund both of which are at final stages towards being gazetted. The Fund will allow industry better access to funding, particularly for defence exports.
Mapisa-Nqakula said these efforts “will never be enough” and called on industry to come up with additional measures to support the industry.
One area the minister addressed is defence exports and the problems companies have encountered in selling products outside South Africa. She said there is need to improve the performance and efficacy of the arms control authorities to ensure that there are no undue delays and administrative lapses that compromise the industry’s ability to competitively export from South Africa.
However, she advised defence companies to anticipate export permit applications and evaluate South Africa’s political position on some countries, especially when there are human rights abuses, for example. “If so we don’t grant an export permit. Just one word of advice,” she said.
“My department and I remain committed to providing you with the necessary political support in all your future export endeavours. In fact I must highlight that it becomes my mission to market our defence industry, together with the Chief SANDF, Service and Division Chiefs and generally SANDF personnel,” Mapisa-Nqakula told delegates at the conference.
“The downside however happens when there is no follow-through from yourselves as the SADI on the bilateral engagements I would have undertaken and committed to, thus leaving us with egg on our face.” The minister added that she has encountered criticism at defence shows when customers complain about problems with South African defence products, especially from companies that are no longer in business. “It puts us in a very difficult situation that is embarrassing. It subjects us to a lot of criticism and tarnishes the images of the country, not the company concerned.
“That notwithstanding, we will also continue work with you in engaging other relevant departments to ensure that we have a “government wide” approach to providing this support and I believe NDIC can play a key role in this regards.”