The government announced on Thursday that it had terminated discussions with Britain’s BAE Systems to sell it a 30% stake in state-owned arms and technology group Denel.
Department of Public Enterprises Director-general Sivi Gounden said in a statement that BAE Systems had been selected as the preferred partner for Denel in 2000 as part of government’s policy of restructuring in the defence industrial sector.
He said a ”thorough and complex” series of negotiations began.
”Despite recording significant progress in a complicated process, agreement could not be reached on a number of commercial and contractual arrangements to the satisfaction of the South African government.”
Gounden said since 2000, government had successfully concluded the formation of Turbomeca Africa, a new aerospace engine and maintenance facility, comprised of 51% of Turbomeca France, and 49% of Denel Airmotive.
The company was operating comfortably and to schedule within the terms of its business plan.
”Denel itself has also shed some of its loss making, non-core, entities during this period.
”It has improved its order book from less than R1-billion in 1998 to over R10-billion today. Denel continues to generate technology transfers into the company through its participation in the Strategic Defence Package acquisition by the SANDF.”
However, Gounden said, Denel and BAE Systems would continue to participate in joint production ventures and programmes where possible, and the relationship between the two companies remained amicable and healthy, particularly in relation to co-operation with the offset packages of the Hawk and Gripen programmes in the multi-billion rand arms deal.
He said government would continue to seek international partners for Denel as the company continued to grow and develop its product and technology ranges.
BAE Systems also confirmed that it had received a letter from Gounden advising them that the department had decided not to pursue the Denel Strategic Equity Partnership that has been under negotiation for several months.
”BAE Systems fully accepts government’s decision,” BAE spokesperson Linden Birns said in a statement.
”We remain firmly committed to South Africa as a long-term strategic business partner both in the context of the Strategic Defence Procurement and beyond.”
”We will continue to develop our already strong partnerships with the South African National Defence Force and the local aerospace and defence industries, including Denel,” Birns said. – Sapa