Denel: Africa’s future supplier of drones

In the absence of massive new orders or the cancellation of drone deals, Denel will make more money selling missiles and drone aircrafts in the 2014 financial year than from its world-renowned artillery systems or by selling helicopters.

And many of those drones and missiles will go not to the Middle East or buyers in developed markets, but north of Limpopo.

Financial results for the year (until March 2013) released on Monday, show that Denel is fast heading to making more than half its money from foreign buyers. And while it reported growth everywhere in the world, the rest of Africa was a stand-out performer.

The figures also show that in the immediate future, it is new-generation missiles and unmanned aerial vehicles that those buyers will demand – and which, according to Denel, will keep it "profitable and sustainable into the foreseeable future".

Public Enterprises Minister Malusi Gigaba is not so sure; at the release of the results, he warned that Denel is not quite out of the woods, even as chairperson Zoli Kunene declared it had "indeed turned the corner".

But a difference about the certainty of future profitability aside, Denel did report its third consecutive annual profit, after a torrid period of losses. Even if, in the context of revenues of nearly R2-billion from the South African government alone, that profit was just R71-million. 

Emerging markets
However, as the government spend stayed stable, exports soared, especially in the Denel Dynamics division, which is developing drones with a longer range than those already in use to combat rhino poaching in the Kruger National Park, and is doing brisk business selling a range of high-tech missiles.

Denel does not identify specific customers or countries in reporting on exports, although it is believed that Saudi Arabia may be the company's first customer for assassination-capable drones. 

Yet, overall export numbers show that it is African countries queuing up to buy Denel's various weapons systems. The company is also openly targeting emerging markets, which it believes will keep spending on weapons even as the developed world maintains or decreases arms purchases.

Denel Dynamics reported an increase of 26% in revenue, with exports jumping 76%, and a forward order book that could well see it dwarf the rest of Denel's businesses put together in coming years. In combination, the numbers suggest that the next decade will see a significant number of Denel drones flying over African countries, some of them armed.

The US, still considered the world leader in armed drones, has actively tried to prevent the proliferation of drone technology, denying even close allies access to is Predator range.

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Phillip De Wet
Guest Author

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