Industry association the South African Aerospace, Maritime and Defence Related Industries Association (AMD) reports that the key issue facing the South African defence industry in 2010, is how government will use its acquisition muscle for projects in the landward naval or maritime environments.
AMD executive director Simphiwe Hamilton says that there has been increased foreign ownership, particularly within the Denel group, as well as increased focus on the export markets in response to the relative inactivity on the South African defence acquisition front.
"However, if, for instance, project Hoefyster, which involves State-owned defence company Denel supplying 250 new infantry combat vehicles to the army, meets its development-related milestones and enters into production, a hive of activity can be expected on the structures-based manufacturing, as well as on assembly work, " he notes.
Other key projects include Vistula and Sapula, involving the rejuvenation of logistical trucks and armoured personnel carriers respectively, as well as project Biro, which is aimed at sourcing off-shore patrol vessels.
Hamilton asserts that the local defence industry has numerous competitive advantages, such as the price and quality of its products and systems.
"The country's pre-1994 autarkic outlook created a somewhat independent defence industrial capability that now offers a viable alternative to nonaligned and non-North Atlantic Treaty Organisation defence clients, who value access to reliable supply of defence equipment and services. Further, the size, ingenuity and interdependence of the industry enables it to respond swiftly and flexibly to new requirements with some developments reaching fruition in six to nine months from inception," Hamilton points out.
He adds that the industry's primary client, the South African National Defence Force operates in the diverse and exacting climatic and geographical conditions of the African continent, which means that the local defence industry's offering is designed to function optimally in all conditions and is thus ideal for most defence applications globally.
The local industry also has a strong defence electronics bias, making it a good partner that is able to offer systems engineering and integration capabilities in upgrading and customising foreign defence systems for third-party markets. Further, the industry offers a range of capabilities that include the design, development, manufacture and maintenance of landward, aerospace and maritime systems, as well as the provision of mission specific systems and subsystems. It also provides the required enabling capabilities, like training, modelling and simulation.
AMD reports that the defence industry's contribution to the local economy has been consistent in providing no less than 17 000 highly technical jobs in the past five years.
"In the past, the defence industry has been a fertile ground for nurturing engineers, technicians and artisans with most of these now contributing significantly in key national projects in transportation, construction and power generation," says Hamilton.
Further, the technology that has been developed for use in defence, has also found good use in rail safety, as well as reducing crime through the use of signal and data processing technology, and improving mine safety and productivity. The defence industry also contributes high value-added exports that improve the country's foreign reserves, as well as its balance of payments.
Further, all this happens within a fairly depressed domestic defence market that has not only experienced severe production declines in the local defence-related manufacture, but also significant capital outflows of more than 70% as part of the country's strategic defence packages, Hamilton says.
Growth in the industry is envisaged to be in the areas of unmanned aerial vehicles, space technology, as well as passive and active protective systems. Further, the industry can grow as a subsystem supplier through integration into the global supply chain.
Despite the industry's continued exposure to severe budgetary declines, as well as strategic and systemic uncertainty relating to the defence industrial policy framework, AMD reports that the local defence industry remains resilient and competitive in the service of diverse client requirements locally and globally.
"While the industry may not be as healthy as we had hoped for and the future not as bright as desired, we remain cautiously optimistic of the prospects for growth in this industry," Hamilton concludes.