Analysis: Sliding rand has serious implications for SANDF


The steady slide in the value of the Rand since 2011 holds serious implications for the Defence Force, with the dramatic slide in December serving to underscore that. That recent slide may yet be reversed in the near term, but the longer-term trend will be more difficult to reverse.

The obvious risk is to equipment projects, and that faces the Defence Force with challenges it will find difficult to overcome. Government’s foot-dragging over equipment projects since the ‘Strategic Defence Packages’ has left the Defence Force very patchily-equipped: It has some modern equipment courtesy of those packages (frigates, submarines, Gripen, Hawk, Lynx) and 1990s projects (Rooikat, G6, Rooivalk, Oryx), and the is Badger entering production, but much else is obsolescent at best (Olifant, Casspir, Mamba, Samil, C-130) or totally obsolete (Dakota).

There are also critical capability gaps: The Navy has too few ships and half are obsolete; there are no maritime patrol aircraft; and the Army lacks real air defence capability. Assuming South Africa intends to play a regional role, there are also the lack of heavy/long-range airlift, tanker aircraft and sealift to consider.

Less obvious is the challenge of more expensive spare parts, which will limit the ability to keep existing equipment operational and hamper training. Even less obvious is the indirect impact of the sliding Rand, which will hit the economy and thus government revenue and the national budget. Unless funds are reprogrammed from under-performing ministries to defence – hardly likely – there is little likelihood of even a small increase in defence funding.

If the Rand does not recover from its present parlous state against the major currencies, there is little chance of satisfying equipment requirements, and a budget that continues to limp along just below inflation will be fatal to efforts to implement the Defence Review, even those aspects that do not involve new equipment. And failure to at least begin implementation will see a rapid decline in capability.

What to do?

As a first step the Defence Force will have to tighten its belt some more. Even if the most recent slide of the Rand is reversed, that may not happen quickly enough. The Defence Force cannot over the short term withdraw from missions, streamline itself or cut personnel, so all that is left is to – yet again! –cut into equipment projects.

There are not too many options, but there are some that would not cause fatal damage:
• Cut the long-range VIP aircraft. It is a real requirement, but not critical.
• Postpone the IPV component of Project Biro. The OPVs can complement the frigates and the remaining smaller vessels can handle inshore tasks for now.
• Consider postponing the hydrographic survey vessel.
• Postpone the maritime patrol aircraft acquisition and reinstate the much cheaper maritime surveillance aircraft project.
• Drop any further work on the C-130 fleet. They are irrelevant to future regional missions and not required for internal or border tasks.
• Scale back the planned acquisition of light transport aircraft to the minimum required for Special Forces operations and optimise the selection for that role.

But some projects must continue: The Badger acquisition needs to go ahead if the mechanised force is to be credible, and to avoid fruitless expenditure; additional ship-board helicopters are essential for the frigates and OPVs, and the Gripen, Hawk and Rooivalk need weapons. Stocks of spares and munitions must also be rebuilt and existing equipment must be repaired. There is also a clear need for some tactical trucks to support the mechanised force.

That is about all that the Defence Force can – without serious injury to itself – do for now.

Beyond that, government must finally become serious about defence: It must either fund the Defence Force to a level commensurate with what it expects the Defence Force to do, or it must redefine national policy to fit what the Defence Force can do on current funding levels.

In the latter case the Defence Force will have to shrink to fit the budget if it is to retain useful capability, concentrating on border and maritime security (including the Mozambique Channel through which most of our oil moves and the ports of which are critical to the SADC economy), airspace surveillance, Special Forces and a small conventional force as a core deterrent to any military adventures in the immediate neighbourhood. It can then also look to cutting back the ‘overhead’ structures that currently absorb so many people and so much funding.

But to close on a happier note, the sliding Rand does represent an opportunity for the defence industry: The cash flow from existing export contracts will improve – and some of those are quite substantial – and its products will become more marketable. And some stringent focusing will also allow the impact of more expensive imported components to be kept within reason.