After recording a turnover of R1 billion last year, Denel Land Systems (DLS) has a vision to grow this to R5 billion a year within the next five years, according to CEO Stephan Burger.
Burger told DefenceWeb that he expects the company to sell around R1.5 billion this year and achieve a minimum turnover of R3 billion a year, in three to five years’ time. He said that the targets amounted to “a very ambitious vision, but at least R3 billion is achievable.” Additional vehicles and artillery business are expected to play a big role in getting to this target.
DLS has in excess of R10 billion worth of orders at the moment, with the majority of this going towards the Badger infantry fighting vehicle (IFV). 238 are being built for the South African Army, with production proper set to start next year and deliveries continuing through 2022. The Badger IFV will replace some of the SANDF’s ageing Ratels.
The vehicle is busy undergoing final developmental testing. Subsystem testing has been done, with all subsystems qualified. The 30 mm CamGun is fully qualified and can fire Rheinmetall, Oerlikon and Nammo ammunition. The Section variant was the first to be tested, with testing of all five variants and their different subsystems overlapping. Burger said that DLS plans to have the Section variant fully qualified and accepted by early next year. After the Section variant, the Fire Support, Mortar and Missile variants will be qualified.
The Badger project is having an impact across the defence industry, with contracts being placed with various local companies. “Some Badger contracts have been placed…some need to be placed,” Burger said. Around 70% of the vehicle will be produced in South Africa, supporting 2 000 jobs. Malaysia’s R3.5 billion order for Badger turrets and weapons is also benefitting the local supply chain.
Some of the companies involved in the project include LMT (responsible for the design of the flat mine-resistant floor), Sagem, with a local partner (thermal imagers), Saab with its South African subsidiaries (gun aiming and directing computers) and BAE Systems in South Africa (supplying 98 gunner sights and 171 commander sights). The sights from BAE Systems have already been integrated and accepted. Burger said that Sagem’s MATIS thermal imagers were selected, because local design suppliers could not meet specifications.
“The whole South African industry should be grateful for Badger. It is not only a creator of jobs, but an incubator for technology…it is a hugely strategic programme for defence capability in South Africa,” Burger said, adding that it “can compete with the best in the world.”
He told DefenceWeb that there have been enquiries from the Middle East and Africa regarding the vehicle. DLS has an agreement with Patria Land Systems to market and export the vehicle (the Badger is based on the Patria). “I have no doubt that we shall get follow-up contracts from foreign countries.” However, DLS is not actively marketing the Badger yet, as production is focusing on the South African National Defence Force (SANDF).
Denel Land Systems’ goal is to be seen as the leading supplier of land based defence equipment in South Africa, especially for the SANDF. However, in the last two years, 80% of DLS’ turnover came from exports, but, going forward, Burger wants to change that ratio to 50/50.
Nevertheless, his company is looking at export opportunities in a number of areas. “The Middle East was, is, and will be an important customer for us,” Burger noted, while in Africa DLS is seeking to enter the small turret and vehicles market. “Africa is clearly an important focus area…I foresee substantial business from Africa.” DLS is selling R450 million a year to Africa and this will increase with the increasing instability on the continent. A lot of this business will come through the United Nations and similar organisations, especially for DLS Mechem, which supplies armoured vehicles, field camps and de-mining services.
DLS is pursuing significant orders for artillery in the Middle East, with negotiations currently underway. The company is expanding this capability and appointing people to grow the business. Burger said that Denel was the preferred supplier for the G6 in three countries.
Also on the artillery side, DLS is making slow progress on the development of its 105 mm light howitzer, as a launch customer has not been found to expedite development. Burger said that DLS is serious about artillery, but is focusing on the 155 mm G6 and mounted 155 mm guns. Burger said that he still hopes for a local requirement (Musuku), for such a light artillery gun, as it fills a very important gap and hopes that the SANDF will be the launch customer for the 105 mm system.
Burger told DefenceWeb that the small arms production line is busy and is focusing on the refurbishment of assault rifles for the SANDF and South African Police Service. The company has been refurbishing several thousand assault rifles a year, for the last 2-3 years, and expects to continue doing so for the next 3-4 years. The refurbished weapons have replaced items like new barrels and other parts.
DLS has delivered upgraded R4s to the SANDF, with 40 mm grenade launchers and other improvements, as a precursor to the African Warrior assault rifle upgrade for the SANDF, the order, for which Burger hopes, will come soon. The upgrades are aligned with the SANDF requirements and features things like new sights, Picatinny rails etc.
Burger said that DLS has lately been selling machine guns and is running low on stock – production will probably start again. Mostly lots of 100-200 SS-77s are sold at a time, primarily to repeat customers. Burger said that the last SS-77 order was from an existing customer. The company is also selling 40 mm grenade launchers, mortars, 20 mm guns and small infantry turrets.
Overall, Burger said that DLS was in an upward spiral, executing contracts, negotiating some and pursuing others. “The image of Denel has changed…we are getting great people applying for work. I am very upbeat about the future.”
However, he was more pessimistic about the rest of the local defence industry. “I am very concerned when I look at what’s happening in the local market. There is little alignment and too many players in the same field. Local industry is on a knife’s edge. The only way the South African landward industry can be sustainable is if, on an OEM level, there is consolidation. There has to be.”
He added that on the systems assembly level (OEM) there need to be only a few players and on the manufacturing and parts supply level, there need to be many suppliers. There should be a triangle of companies with OEMs at the top and suppliers at the bottom, but, at the moment, that triangle is upside down. “By default this consolidation will and is happening, the world over.”