Planned weapons sales to previously taboo customers, such as Libya and Turkey, are part of the package of measures adopted by the troubled parastatal defence conglomerate Denel to turn around persistent losses and declining sales.
Briefing Parliament’s portfolio committee on public enterprises on the status of his turnaround plans for the company, CEO Shaun Liebenberg said new markets were opening up as the company won improved political backing for its marketing efforts and sought more flexibility from the National Conventional Arms Control Committee (NCACC), which regulates arms exports, ostensibly limiting sales to repressive regimes and conflict zones.
The company will record a loss of about R1billion for the 2005 financial year, he said. ”There are markets where I can go right now and get R1billion worth of business, but those markets are closed to us for very good reasons,” he said. Other markets, however, were closed for what he described as ”legacy” reasons. Libya, which is enjoying dramatically improved diplomatic relations with the West as its dictator Moammar Gadaffi opens it borders and oil fields to foreign investment, is one potential customer.
A more immediate prospect, however, is Turkey, where Denel hopes to conclude the first major sale of its hi-tech attack helicopter, the Rooivalk, despite persistent concerns from human rights organisations over the use of helicopters by Turkish forces in suppressing internal dissent. This deal, worth between R12billion and R15billion, would rescue the Rooi-valk programme from commercial oblivion. Despite its impressive capabilities, the helicopter has been unable to find international customers in competition with European and United States alternatives.
”Technically, we are looking very good,” Liebenberg told the committee, but he warned that Turkey might feel constrained to buy from a European country, given the support it needs in its quest for European Union accession. The deal is already being used to apply political leverage in the increasingly bitter stand-off between Turkey and France.
Denel is competing against the Franco-German firm Eurocopter, which manufactures the Tiger, Italian firm Augusta with its a-129 Mangusta and Russia’s MI-28 havoc. It narrowly lost out to Eurocopter in a bid to sell the Rooivalk to Australia, but has been in talks with the firm over a strategic equity partnership for aspects of its helicopter business.
According to French and Turkish media reports, Eurocopter has sent a strongly worded letter to French Prime Minister Dominique de Villepin, protesting at proposed legis-lation that would make it a crime to deny the ”genocide” of Armenians at the hands of Turkish troops during World War I.
The Bill exacerbated tensions between the two countries, which are already at odds over French opposition to Turkish entry into the EU. Some Turkish newspapers have said that the contract will most likely go to Denel if the French Parliament passes the Bill, which was due to be debated as the Mail & Guardian went to press.
Liebenberg said Turkey had traditionally been off limits because of sensitivities about its internal situation, but the Rooivalk deal now had backing at presidential and Cabinet level, and two ministers would soon visit Ankara to press for a deal.
NCACC approval for this transaction, should it happen, has not yet been sought, said Liebenberg, but he is confident that the political backing of the Presidency and Public Enterprises Minister Alec Erwin, who sits on the committee, is in place.
Turkey has, since 1996, sought to conclude a major helicopter purchase to assist in its crackdown on the activities of Kurdish separatist rebels in the east of the country. A previous deal to buy 145 King Cobra helicopters from the American firm Bell Textron ran into intense international opposition over human rights concerns, and the US ultimately withdrew its bid on the grounds that it was dissatisfied with the tender conditions.
Amnesty International has been protesting since the mid-1990s about the use of military helicopters for both transport and attack purposes in operations that have apparently targeted civilians in remote parts of the country. It has repeatedly said helicopter exports under these circumstances violate international law.
South Africa’s National Conventional Arms Control Act prohibits the export of military equipment if there is a risk it will be used in the violation of human rights. Sales to Libya, where economic opening has not been accompanied by democratic reforms, may also attract scrutiny.
Denel has often expressed frustration in the past with the approvals process at the NCACC, which is charged with applying the provisions of the Act, but Liebenberg says the company is working much better with the committee now as government support for his restructuring plan becomes more coordinated.
The committee, chaired by Minister of Provincial and Local Government Sydney Mufamadi, is supposed to report annually to Parliament on weapons exports. Its 2004 report is more than a year overdue and 2005 statistics, which were due at the end of March, have yet to be tabled. It has been criticised in the past for allowing sales to countries with poor human rights records or messy internal conflicts.
Denel is restructuring into a holding company with focused subsidiaries working in areas such as missile technology, aircraft components, optical systems and artillery. Equity in each of these is likely to be sold to international partners with the heft to assist in market access and the capital to help scale up production.
As the M&G has previously reported, the government has agreed to provide about R5,1billion to recapitalise Denel and rescue it from bankruptcy over the next three years.