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Reboot for SA’s defence industry

South Africa’s defence industry, a former world leader side-swiped by apartheid’s fall, is aiming for recovery with an eye on the crucial export market and local state spending.

The industry turned over $2,6-billion last year, contributes about 7% of total manufacturing output, and aerospace has been identified as a key area for South Africa’s future industrial growth.

“We for the first time in a long time see huge potential for the re-establishment or the re-development of the South African defence industry,” said Ivor Ichikowitz of the Paramount Group, Africa’s largest private contractor, who predicts 10% annual sector growth.

South Africa’s apartheid isolation created an insular industry to prop up white minority rule and support violent forays into neighbouring states. But the shift to peaceful democracy has undercut defence budget priorities.

“The industry as it is is on a cusp. It’s been deeply hammered by the defence cuts over the years,” said defence analyst Helmoed-Romer Heitman who argues that the government’s support is still critical.

“It’s a very much smaller industry than it used to be. It’s a very fragile industry.”

Worldwide military spending reached $1,53-trillion last year, according to the Stockholm International Peace Research Institute (SIPRI), with American and European companies topping equipment sales.

South Africa’s biggest manufacturer is the loss-making Denel group which replaced the apartheid era’s production wing set up in the late 1960s in response to an international arms ban on the pariah state.

The state-owned company has a 61% local order list and also sees growing its exports as key to future prospects.

One of its subsidiaries, Mechem is marketing a new version of its hulking Casspir armoured vehicle, a once detested apartheid symbol which featured in the blockbuster film District 9 and is used by the United Nations.

“We were incubated during the sanction era,” said the firm’s Henry Abrahams. who added that he would like to see the South African defence department buy more.

“That gave us our own fingerprint in terms of a lot of the applications. It delivered a whole lot of skilled personnel [and] a whole lot of benchmark standards in the industry.”

Global minnow
Africa’s biggest economy was the world’s 17th largest arms supplier last year but it has been criticised for some deals, such as approving a Chinese arms shipment to be sent via South Africa to crisis-struck Zimbabwe two years ago.

Institute for Security Studies analyst Guy Lamb predicted such deals will continue, saying South Africa’s industry was a minnow globally.

“The consequences of this are that the South African arms industry often has limited options as to which states it can sell its products and services,” he wrote in July.

Paramount, which also launched its new armoured vehicle Mbombe at last week’s Africa Aerospace & Defence, believes that its smaller deals in Africa will be a blueprint for the company.

“Globally, that niche is opening up into a very substantial market. There are many developing countries around the world that have exactly the same needs as a lot of the customers in Africa that we’ve cut our teeth on.”

While Heitman does not see South Africa’s arms industry ever returning to its former size, he says there is no reason why it cannot restart although he emphasised the need for government sales.

“If we don’t start spending [on arms] it is going to die,” he cautioned, saying local sales also demonstrated product capabilities to the export market.

“It is teetering. If we start investing a bit of money and buying stuff ourselves, it will move up.” – AFP

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