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May 18, 2007

Denel commits to 70% local content for R8bn Hoefyster contract

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The State-owned arms manufacturer, Denel, has earmarked more than 70%, or R5,6-billion, of its R8-billion Project Hoefyster, for local suppliers, Denel spokesperson Sam Basch said on Friday.

Basch said, however, that it was too early to determine what percentage would be allocated to black economic-empowerment (BEE) firms and small, medium-sized and micro enterprises (SMMEs), but indicated that all subcontractors would be required to adhere to government’s guidelines on BEE procurement and SMMEs.

“We still have to negotiate with local suppliers,” he noted.

CEO Shaun Liebenberg and Public Enterprises Minister Alec Erwin announced the contract between Denel and the South African National Defence Force in Cape Town, on Thursday.

In the past, concerns have been raised over how much local suppliers were benefiting from State-owned enterprises’(SOE's) spending, which was making up the bulk of government’s R415-billion investment drive.

Cabinet approved a parastatal supplier-development policy, aimed at maximising the impact of SOE's large-scale capital projects on shared growth, early this year, and has set local procurement as a key performance indicator for SOE executives.

Denel stated that the company, as prime contractor, would manage a supply chain of scores of local subcontractors, which would guarantee local companies business for the next ten years. Some companies would also be guaranteed with follow-on support work.

Denel also said that it would involve numerous South African defence companies and subcontractors, like BAE Systems' South African subsidiary Land Systems OMC. The actual vehicle would be locally built under a Patria license.

The Project Hoefyster contract was the largest deal signed in Denel’s 16-year history and involves the company supplying 250 new infantry combat vehicles for the South African Army.

Armscor would be placing phased orders with Denel Land Systems over a ten-year period.

"Not only does this large defence contract support and give a much-needed injection to local industry, but it also sustains the commercial viability of the businesses, notably Denel Land Systems. Importantly, it will drive the capability of the Denel and other local companies to operate at world-class standards and international best practice," the company said.

Meanwhile, Erwin also said this week that Denel would drive the establishment of manufacturing clusters to boost the local manufacturing industry. The clusters would serve as a catalyst for the transfer of advanced manufacturing technologies and know-how to the broader manufacturing sector, he said.

Edited by: Creamer Media Reporter
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