African countries have hiked defence spending in the last two years in response to growing insurgency, threats to stability and economic development and the boom in oil profits. "Continent wide defence spending has increased from $23.6 billion in 2007 to $27.7 billion in 2009."[i]
Algeria, Libya and Sudan have benefited from greater oil profits allowing them to invest more in their militaries[ii] while states such as Mali, Mauritania and Chad have boosted defence spending to combat an increasingly aggressive insurgency.[iii]
There is also a continent wide force modernisation drive and greater involvement in UN peacekeeping missions, which require flexible and well equipped forces.
African defence companies such as Paramount Group have emerged as primary partners of governments seeking stability and growth. Based near Johannesburg, Paramount is now the largest integrated private defence and aerospace company in Africa.
The company recently sold a substantial number of armoured vehicles to prominent African states and is concluding deals with others. The workforce has doubled over the last 12 months to meet further demand.
Ivor Ichikowitz, Executive Chairman of the Paramount Group, said: “African countries have increased defence spending by $4.1 billion since 2007 – which is quite a significant amount. The reasons for this growth vary from tackling insurgencies to buying new equipment for outdated forces. In addition, oil producing African states are far more aware that without security they cannot hope to prosper from the economic benefits associated with their natural resources.
“I think African nations have finally ‘come of age’ and are keen to develop the capability to tackle security issues such as immigration, terrorism, humanitarian catastrophe and peacekeeping independently of external powers. This is a very positive development for Africa and the international community.
“While some commentators have questioned whether this rise in expenditure is a good development, I think it’s important to note that there are many positive spin-offs associated with a strong African defence industry – particularly in the areas of technology development and employment.
Ivor Ichikowitz went on to say: “The reality is that a strong domestic defence industry stimulates innovation, provides employment in highly paid jobs and contributes significantly to government tax receipts. This is why I view Paramount Group as an African asset, because it invests in its people and African technology – and more importantly – is keen to share this knowledge with other African countries.
“The reason Paramount Group is benefiting from this growth – unlike some of our other continental competitors – is because we have the technical understanding to produce world class vehicles and are willing to share that knowledge. We also offer a range of flexible financing packages, focused turnkey solutions and ongoing technical support to our clients, all of which emerging economies appreciate.
“Last month Paramount Group launched a six wheeled infantry fighting vehicle called Mbombe in Cape Town, and the company has already experienced a strong level of interest because it is a world class product that incorporates highly advanced features that outflank the big Western manufacturers.
As well as increasing sales, Paramount Group is also pursuing an aggressive acquisition strategy. Last year, the group bought a 19% stake in Aerosud, South Africa’s largest independent aerospace company, which manufactures parts for Airbus and Boeing including galleys, fuel supply systems and wing and fuselage components.
More recently, Paramount Group bought a 30% stake in leading South African communications company Emcom Wireless Ltd, which provides mission critical radio communication solutions for defence forces and internal security. This investment has allowed Paramount Group to adapt to the growing market for peacekeeping which require high tech communications in order to operate effectively with multi-national forces.
Ivor Ichikowitz concludes: “This is Africa’s moment. For too long Africa has been associated with economic underperformance and an inability to solve its own regional security issues. This rise in defence spending shows that African countries are assuming greater responsibility for the development of the continent. This is good for Africa’s people because it means the continent is more stable and politically independent. However, it is also good news for companies such as Paramount Group because it means we can continue to invest in African economies, its people and share technology across the continent.”