One Arms Deal defence industrial participation project still outstanding


Armscor is managing 17 defence industrial participation (DIP) projects as part of the 1998 Strategic Defence Procurement Package (SDPP) with another one outstanding and seemingly unable to discharge the obligation.

The Armscor annual report for the 2014/15 financial year notes “all but one of the DIP obligations has been fully discharged”.
“The only remaining SDPP related DIP obligation is one incurred by MBDA for the acquisition of the Exocet surface-to-surface missile for deployment on the SA Navy frigates. Although MBDA, the European-based missile systems manufacturer, has until March 2016 to discharge the obligation it has not been able to propose any acceptable business plan and fulfilment seems unlikely given the size of the outstanding obligation (R933 million).
“MBDA’s proposal to establish a test bench capability in South Africa to service the SA Navy’s Exocet missiles is considered to be technically unfeasible as the proposed test bench is not usable on the current configuration of the SA Navy missiles and would require the missiles to be upgraded at significant cost,” according to the report.

The 17 active DIPs have a total of R6.6 billion in credits passed as of March 31 this year and a lone DIP managed on behalf of the SA Police Service had credits passed with a value of R151 million.

All other SDPP DIP obligations were fully discharged during the 2013/14 financial cycle.

In its report Armscor noted that offset credits passed during the reporting year were valued at R696 million, with Armscor concluding one new agreement during the reporting period.

Banked offset credits – called pro-active DIP credits – are currently worth R3.4 billion, with the credits being either excess from previous programmes, or those created under pre-offset agreements with Armscor ahead of a company’s future work on South African contracts.