State-owned defence industrial group Denel hopes that its R21-billion order book for the next six to eight years will enable it to become self-sustainable over the longer term and to avoid further financial dependence on the fiscus.

“We will no longer be the drain on the State that we have been [in the past],” Denel CEO Riaz Saloojee said at a media briefing on Tuesday.

He added that Denel had experienced a “difficult” period on the back of constrained economic growth and the consequent contraction of the national defence budget.

“However, the confirmation by the Draft Defence Review 2013 that Denel is a national asset in providing sovereign and strategic capabilities, positions Denel as the premier defence industry organisation in South Africa, and confirms its strategic importance,” said Saloojee.

He added that the implementation of the recommendations of the draft review would lead to further dynamic growth of the South African defence industry, in which Denel would play a strategic role.

Commenting on the release of the Presidential Review Committee report on State-owned entities (SOEs) last week, which, among other things, recommended the absorption of non-performing SOEs into government departments, Saloojee said he was confident of the group’s position.

“The decision to absorb Denel into a department is a State decision, but I am sure that we will remain a SOE because of our strategic capabilities, which must be maintained,” he said.

The group boasted a growing market share in key export markets, with high value-added products and services having earned in excess of R1.7-billion. In addition, the company had invested R530-million on research and development, of which R130-million was self-funded.

CIVILIAN MARKET EXPANSION

While Denel’s primary mandate was to provide the South African National Defence Force (SANDF) and the local defence community with strategic technology capability, products, services and support, it had recently focused on expanding its capability into civilian markets to boost revenue growth.

“Our strategy is to grow the company’s revenue through diversification, exploring new markets and entering into new partnerships – both locally and overseas – and in leveraging our technology and intellectual assets,” said Saloojee.

This included the provision of unmanned air vehicles for environmental management; border control technologies; civilian aircraft maintenance, repair and overhaul services; demining operations and space programmes.

“We are also excited about opportunities that will emanate from initiatives such as the Aerospace Sector Development Plan and the activities of the recently created National Space Agency. Denel intends to contribute to these initiatives using our experience in this field,” said Saloojee.

DEFENCE MARKET GROWTH

He added that the group would look to grow its share of the defence business in strategic markets – notably in Africa, the Middle East, South America and the Asia-Pacific region.

This would include investigating  opportunities in the Middle East for the provision of missiles, artillery systems and ammunition, and maintaining a stronger presence in South American markets, especially in the fields of missile provision and aircraft maintenance.

Locally, Denel said it was engaging with the Department of Defence's primary acquisition agency Armscor to ensure the finalisation of the contract for Project Hoefyster, which would see the company producing 264 infantry combat vehicles for the SANDF.

In addition, the parastatal would also be the prime contractor for Armscor on a “key” systems integration project.

Saloojee said that, through these and other projects, Denel was making a significant contribution to high-tech manufacturing in South Africa, which would enable the SOE to make a contribution to the broader national objectives as defined in the Industrial Policy Action Plan and the National Development Plan.