A few black players are starting to deal inthe arms world, writes Ferial Haffajee
THE two men in dark suits riffle rapidly through the sheafs of paper. “Fifty? No. Was it 60?” Seelan Moodley asks Krish Naidoo. They page again. Then Moodley confirms that “in the two months since we’ve started, we’ve landed or are about to land contracts worth between R60-million and R70-million”.
Meet the new big, black guns. Together, Moodley and Naidoo run Miltech, one of the biggest black-owned arms companies in South Africa. They are among a host of black arms manufacturers blasting on to the scene, encouraged and enabled by an industry affirmative-action plan.
When it comes to the shadowy world of dealing in arms, however, the apartheid-era sanctions busters – mostly white men – continue to broker the big contracts and earn the highest commissions. They cream off anything between 0,5% and 5% per transaction, which usually translates into a couple of million rands.
They are the essential middlemen who, as one of them puts it, “don’t have to go through the bureaucracy”. They sell to whomever they like.
Only two black dealers appear to have cracked the jealously guarded turf of the arms dealers: one of them is apparently a former senior member of Umkhonto weSizwe.
Miltech has headhunted the cream of military technologists and engineers from Denel and other established arms companies. A look at the CVs of their employees reveal key brains in the development of South African weaponry such as the Rooivalk helicopter, the Cheetah jet fighter and the G6 – the howitzer Denel wants to sell to a yet publicly-unnamed Middle Eastern country.
When it comes to arms sales, details of what Miltech is doing are thin on the ground. But Moodley and Naidoo are optimistic about getting into some of the biggest contracts going, including South Africa’s sales of the Rooivalk and purchase of Corvette warships, as well as the upgrading of the airforce’s C130 aeroplanes.
Moodley started Miltech’s parent company, Panama Technologies, 12 years ago to sell tracking technology to the taxi industry. It branched out into vehicle tracking and expanded its technology base into gaming, telecommunications and information technology. “Then we sat down one day and found that most of our scientists were military technologists,” says Moodley.
One thing led to another and two months ago Naidoo joined the company to help start Miltech as a new subsidiary. A well-known human rights lawyer in the 1980s, he joined Armscor in 1994 in one of the few senior black appointments made at the parastatal. “I put down “boredom’ as a reason for leaving Armscor,” says Naidoo, who is recognised as the country’s foremost expert in counter-trade (securing trade deals in return for arms transactions), a practice that guides South African arms deals.
Defence spending has dropped by 60% in the past ten years, estimates consultant Geoff Brown. But it is still a R4-billion industry, with exports of about R1-billion a year.
The Minister of Defence, Joe Modise, is keen to have senior black players share in the action, which is why black arms companies are springing up.
Armscor has drafted an “affirmative procurement policy” whereby extra points are awarded to tenders if blacks and women play a prominent role. Miltech is one of the biggest companies, but the Lechabile consortium headed by William Makwinja is catching up.
Makwinja’s name crops up again and again in the defence industry. The Malawian-born and British-trained aeronautics engineer says half his company’s work is military and half civilian. He is coy about the contracts his company has won, but it is known that Makwinja’s credentials helped win a recent tender to provide ground power units to the airforce. The contract is worth R30-million to R50-million.
But Lechabile recently failed to win a R700-million contract to upgrade the airforce’s C130s. The SABC spokesman, Enoch Sithole, was part of that tender, but has subsequently left the group.
Despite this, Makwinja is a name to watch: he is knowledgeable about maintenance of the Rooivalk and highly regarded as a top gun in the industry. “There have been no spectacular deals, but they’re growing,” says Abba Omar, Armscor’s group communications manager.
Omar says the outlay required of a manufacturer is high – as much as R200-million on a big deal – and profit margins narrow. The deals also take many years to put together.
“The affirmative procurement policy won’t empower at the top end, but rather at the softer end like maintenance contracts,” says Brown. This means that, in the short-term at least, black companies in the defence sector will focus on maintenance contracts and supplying equipment.
One of the black companies likely to go places is Kunene Brothers Holdings (KBH). Led by Zoli Kunene, one of five brothers, KBH bought 10% of Grinaker Electronics in 1995. Kunene is president of the Defence Industry Interest Group, a lobbying group for new black arms companies.
The newcomers are aiming at the foreign market, particularly Africa. Miltech’s Naidoo says that countries like the United States, Canada, Israel, India and France are keen to talk: “All of them are interested in working with a black-owned company. South Africa is the ideal base from which to service Africa.”