There has lately been some quite important news from, and affecting, the local defence industry. For example, it has been announced that, provided all the regulatory and other approvals are obtained, State-owned defence group Denel will acquire the entirety of BAE Systems Land Systems South Africa (LSSA). This move will consolidate the main South African producers of armoured and mine protected vehicles, gun turrets and related systems under one umbrella. South African expertise is concentrated in the design and manufacture of wheeled armoured vehicles, and, worldwide, competition in this sector is increasing, with new players entering the market over the last few years. (As for BAE Systems, they are going to concentrate on tracked armoured vehicles, which is actually the sector in which they have the most expertise.)

Hopefully, this move will strengthen South Africa’s place in the market. LSSA’s RG32M LTV is, for example, currently being evaluated by the Brazilian Army for its VBMT-LR programme for an initial requirement of 32 vehicles. (VBMT-LR is the Portuguese abbreviation for Wheeled Multipurpose Light Armoured Vehicle.) There is strong competition for this order, from both Brazilian and international bidders.

The news of the proposed Denel/LSSA deal was quickly followed by the release of the Denel Group’s annual results, which revealed a fourth consecutive year of profits (see the story elsewhere in this edition). In discussion with executives at the event, I learnt that the business that had, in recent years, been the drag on the group, Denel Aerostructures (DAe), was now very close to breaking even and was actually ahead of schedule in its turnaround operation. It was also benefiting, both financially and psychologically, from the production ramp up of the Airbus A400M military aircraft, DAe’s biggest programme by far. To see A400Ms flying real missions, including to trouble zones, in the colours of customer air forces, instead of having to look at computer-generated images, has been a genuine boost for everyone involved.

Staying with aircraft, but on the other side of Pretoria, the private-sector Paramount Group (whose Land Systems division will probably soon be the country’s number two armoured vehicle company) flew South Africa’s latest aircraft design, the Ahrlac in public for the first time. (Ahrlac stands for Advanced High-performance Reconnaissance Light Aircraft.) Hopefully they will soon come up with a better name, just as, some 50 years ago, the Americans replaced the acronym Lara (for Light Armed Reconnaissance Aircraft) with the name Bronco (official military designation: OV-10). The prime contractor for the Ahrlac project is another private-sector South African company, Aerosud. (Again, see the story elsewhere in this edition.)

Back in June, Saab South Africa, part of the Swedish Saab group, revealed that it would produce undisclosed parts for the Gripen E fighter in this country. The Gripen E is the latest generation version of the aircraft, which is operated by the South African Air Force in its Gripen C (single-seat) and D (two-seat) forms. The Gripen E has been extensively redeveloped from the Gripen C/D in terms of both airframe and systems, and will re-equip the Swedish Air Force.

Rheinmetall Denel Munition (owned 51% by Germany’s Rheinmetall group and 49% by Denel) is also doing well, developing and marketing new and improved products and achieving significant export success. Indeed, one can affirm that the local defence industry is enjoying solid success in export markets. This is just as well, as the home market tends to be rather static. (The big local defence programme at the moment is the acquisition, from Denel, of Badger infantry fighting vehicles, under Project Hoefyster.)

Another big domestic development this year has been the release of the Defence Review. As is well known, this calls for increased defence spending (although more modest increases than many believe) over the coming years in order to, initially, halt the current decline in the capabilities of the South African National Defence Force (SANDF) and then, subsequently, to rebuild it. This would all take place over a period of 25 years. The review also recognised the importance of the local defence industry, although, naturally, more in terms of its role in national security than in terms of producing high value-added manufactured exports.

This Defence Review was certainly welcomed by the Minister of Defence. But it is still to be approved by Parliament. Many closely involved in defence (although not necessarily those in the defence industry) firmly believe that the money needed to implement the Defence Review’s recommendations must be found, and will be found. But that is not guaranteed.

Alas, I must confess myself a sceptic. I do not think the money will be found. There are just far too many more immediately pressing issues. Most immediately obvious is the need to recapitalise deeply-troubled national electricity utility Eskom. Earlier this year, the utility asked government for an equity injection of R50-billion. Whether government will respond with cash or guarantees is not yet known. Add the need to revitalise a lot of local infrastructure and restore “service delivery” (the supply of water, electricity, sewage, not to mention health and education) in many smaller towns, as well as peripheral areas of the big cities, in order to bring frequent, often violent, local protests to an end, and I do not see any room in government finances for any worthwhile increase in the defence budget.

The alternative approach is to free up funding for new equipment by cutting the personnel. People, not weapons, are the big expense in armed forces, worldwide. South Africa could have a smaller but, in many ways, more capable SANDF if it took this route. But I am certain that this will not happen: the South African economy is not creating jobs remotely fast enough and government will not want thousands of unemployed ex-servicemen and women, with nothing better to do than join protests.

So it is just as well the local defence industry is doing so well abroad. Exports remain its main hope for growth, nay, survival.