Badger programme delayed due to money troubles at Denel

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The Hoefyster project, tasked with delivering a range of Badger infantry combat vehicles to the South African Army, has been delayed due to Denel’s liquidity crisis, but the company believes it sees the light at the end of the tunnel and is working hard to start local production.

This is according to Ismail Dockrat, Acting CEO of Denel Land Systems (DLS). He told defenceWeb that the programme is running late and that the first production vehicles will not reach the South African Army in May 2019, as had been planned.

DLS is in the final phase of Badger vehicle development, with the focus on the Section variant, which is furthest along. The Command and Fire Support versions will follow next, along with the Mortar and Anti-tank versions. There will also be five new variants for joint operations (the Joint Task Force), including Ambulance, Signals, Basic Artillery Observation System (BAOS), Command and Logistics. A total of 242 vehicles are to be produced.

Dockrat said a major challenge was that many suppliers have had to hold onto stock as Denel cannot pay for it, and Denel has not been able to pay some suppliers for up to a year now. “They are under tremendous stress,” he said. “We cannot pay them because of liquidity challenges in the Group. Hoefyster is a little stuck right now until we can return Denel to a liquid position.”

The defence industry relies on Denel for a lot of business, and as a result of its liquidity challenges, many companies are facing closure, restructuring or layoffs, which Dockrat says “is a big big problem right now”. VR Laser is one such example and is being wound up partly because it is owed money by Denel and partly due to reputational damage done by its relationship with the Gupta family.

Business rescue practitioner Louis Klopper of Coronado Consulting Group told defenceWeb that once discussions with Denel have concluded, VR Laser’s assets will be sold so creditors can be paid, and employees will be laid off. Denel owes R28 million for delivered material, and another R12 million for work in progress. Much of this is relating to the Badger project – VR Laser was a major supplier to Denel Vehicle Systems and Denel Land Systems. “VR Laser is a big hiccough but we will get over it,” Dockrat told defenceWeb.

Dockrat called on suppliers to put their trust in Denel so the Hoefyster project can be put back on track as the health of suppliers, Hoefyster and Denel is all interconnected. “We can’t afford to have defence companies going under,” he said. Denel is working with Armscor and the Department of Defence to work out the challenges to the project. Dockrat added that Denel is doing everything possible to pay all suppliers, but it is taking longer than expected.

With the demise of VR Laser, Denel will insource Badger production, with Denel Vehicle Systems (DVS) taking over. “We need to consolidate internally,” Dockrat said. Denel Vehicle Systems will produce the hulls, Denel Land Systems will produce the turret and weapons and do integration and Land Mobility Technologies (LMT) will provide protection elements such as armour.

Dockrat said Hoefyster is a very important programme to Denel, the South African defence industry and the South African National Defence Force (SANDF). The vehicle will go a long way to modernising the South African Army’s capabilities and ensuring it can fulfil its mandate. It has played a major role in sustaining and developing the defence industry and creating jobs and skills. He said it was regrettable that Denel is giving its suppliers problems, as the State-owned company should rather be developing the local supplier base.

Problems were experienced with the Rooivalk and the A400M component production contract, but these were turned around, and Dockrat is confident the same can be done with Hoefyster.

On the positive side, Dockrat noted good progress with the Malaysian turret order that resulted from the Badger contract, and said DLS is meeting all its milestones there and working well with the other partners (FNSS, Thales and DefTech).



There are also exciting developments on the artillery front, which is a critical area for Denel Land Systems to focus on. This includes the G6, 105 mm and T5 guns.
“Denel is working its way out of crisis. There is light at the end of the tunnel,” Dockrat concluded.