New course being charted for defence acquisition agency as marketplace shifts

7th August 2015

By: Keith Campbell

Creamer Media Senior Deputy Editor

  

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South Africa’s defence acquisitions and research and development (R&D) agency Armscor is considering reorganising itself to better meet the changing demands on the South African National Defence Force (SANDF) and the local defence industry. “We’re looking into restructuring Armscor,” reports new CEO Kevin Wakeford. “We need to do a proper investigation, which we are about to start.”

“The organisation needs to focus on the shifting marketplace,” he explains. “It’s a migrating marketplace. It’s largely determined by the SANDF’s role in Africa. And border security is a big issue. At the moment, we work on a project-by-project basis. It’s demand driven. But we need a more systemic approach, not a project-by-project approach. We need a seamless basis to our operations. Acquisition and R&D are [currently] very separate divisions within Armscor. But we are breaking down the different silos within the organisation, so there will be better cooperation and understanding between the divisions.”

Three Prongs
The Armaments Corporation of South Africa SOC (State Owned Company) Limited, to give its full title, is headed by a board of directors, under a chairperson (currently retired South African Navy – SAN – chief, vice admiral Johannes Mudimu), which reports to the Minister of Defence and Military Veterans. Its three operational divisions are Acquisition, R&D and the Simon’s Town Dockyard (not to be confused with the co-located Simon’s Town Naval Base). These are assisted by six support divisions – corporate compliance, finance, human resources, information technology and infrastructures, marketing and business development, and quality.

The agency’s official mission is to “meet the defence materiel, defence technology, research, development, analysis, test and evaluation requirements of the Department of Defence (DoD) and other organs of State, effectively, efficiently and economically.” It possesses recognised and respected expertise in a wide variety of defence technologies. These are: aircraft (both fixed-wing and helicopters), artillery systems, command and control systems, electronic warfare systems, guided and unguided weapon systems, munitions and small calibre ammunition, naval vessels, radar systems, system maintenance and support, telecommunication systems (static and tactical), unmanned air vehicles, and (ground) vehicle design and manufacture (armoured and mine-protected as well as soft skin).

Acquisition activities embrace the complete life cycle of the product or system in question. First, the relevant branch of the SANDF issues its user requirement. Armscor then assesses the need. This is followed by the process of defining the solution to that need, which involves the concept design and definition phases of the project. Then follows the selection of the right company to fulfil the contract and the management of that contract, which covers the development, industrialisation and production phases of the project. Armscor’s involvement does not end with entry-into-service, for operational experience and advances in technology mean that, in due course, it becomes necessary to upgrade the product or system. The upgrade process goes through the same steps as the original acquisition programme. Finally, the product or system becomes obsolete and has to be phased out and either sold or scrapped. Armscor handles these processes as well.

The agency’s R&D activities are handled by a number of specialised divisions. Under the rubric of test and evaluation services are the Gerotek vehicle test complex and the Alkantpan weapons test range. Gerotek can subject virtually every kind of military and civil vehicles, as well as underground vehicles, to all required tests (endurance and reliability, environmental, mobility, performance), provide the necessary analyses, undertake homologation and provide specialist driver training. Alkantpan has five firing sites and can provide full services and support for ordnance testing and evaluation, up to and including 155 mm artillery. It can routinely provide firing ranges of 55 km, rising (in special cases or if the shells do not contain explosives) to 70 km.

Several units are grouped as operational and scientific research. One of these is armour development (which does what it says, as well as supporting the creation of industrial capacity to produce required armour). Another is the defence decision support institute (which provides specialist support services, including research and analysis decision support and engineering support). A third is ergonomics technologies (better known as Ergotech), which incorporates ergonomics into military systems and undertakes research into, and design of, military ergonomics and man/machine interfaces. The fluid and mechanical engineering group, more usually referred to as Flamengro, is responsible for computer simulation and failure analyses, scientific and engineering support and consultative services for the design, development and employment of artillery systems. Hazmat Protective Systems produces and sells filtering devices for respirators (popularly called gas masks) for both military and civilian use, for protection against most threats to respiratory health. The Institute for Maritime Technology provides defence R&D and test and evaluation for maritime systems. Finally, in this division, there is Protechnik, which carries out research into the protection of people from biological and chemical weapons and contaminants, including evaluating materials for protective gear and developing detection systems.

The technology management and analysis division oversees technology programmes that cut across several areas, to ensure that capabilities are developed and maintained that will underpin the new and altering requirements of the SANDF. It has five main focus areas – aerospace technology, electronics technology, landwards technology, maritime technology and support technology.

The innovation division is responsible for the management of Armscor’s intellectual property (IP), developed as a result of the agency’s various activities. The innovation division carries out general management of IP, exploits that IP manages, new ventures and undertakes contractual management of IP.

Better Aim
The CEO sees things slightly differently, however. “We have three essential mandates – acquisition on behalf of the SANDF; industry support and, I would say, development; and R&D,” he affirms. “All are essential.”

Wakeford is the new CEO, only appointed earlier this year. And he reports to a relatively new board, which was set up just over a year ago. Both the new board and the new CEO were appointed to restore an agency that had become rather dysfunctional. “The new board has stabilised the organisation and has stabilised its relations with its stakeholders,” he reports. “In previous years, there had been an impasse between the board, the DoD and the SANDF. That impasse has been broken.” Relations with the Parliamentary Portfolio Committee on Defence have also been much improved. Relations with the municipalities in which Armscor’s various offices, divisions and units are located are another area in which things are now better.

The new board also had to restore the confidence of especially the local defence industry in Armscor. It sought, and has now succeeded, in getting the agency, the industry and the SANDF all “speaking the same language”. Armscor’s new mantra – In time, on time, all the time – is now well-established and widely known.

The focus is, thus, now on making Armscor truly fit-for-purpose for the modern needs of the SANDF and country. “We need to look at how we can be more systemic and efficient in our support for the SANDF and the South African defence industry,” he explains. “There are huge opportunities in the African market and the global arena. It’s how we respond to these opportunities, in terms of exports and market orientation, that is important.”

Basically, Armscor exists because it has a “client” – the SANDF. “But, in a way, the local defence industry is also a client,” he asserts. “It has a huge funding challenge, especially regarding small and medium companies. The financial services sector is not meeting their needs – yet funding innovation is going to be critical going forward, both for the SANDF and the industry. It is our view – talking about the defence industry globally – that those countries with strong defence industries have lots of innovation, which spills out in the civilian sector. Defence can stimulate technology and industry, develop jobs and stimulate the economy.”

A restructured Armscor could help address these industry issues. “A future possibility would be us developing funding innovations. But that needs a great deal of market research first. We’ve got to look at financial instruments that would work. We need to increase business support, to help the local industry. We also need to link foreign acquisition to real investment. We’ve got to look beyond Dip [defence industrial participation, or offsets], with the necessary warrantees and guarantees in place.”

Restructuring is not a euphemism for downsizing. The agency has nearly 900 staff, excluding the personnel at Simon’s Town Dockyard (who are close to 300). The bulk of these personnel are highly qualified engineers and scientists. “These are resources the country doesn’t want to lose,” affirms Wakeford. “If we restructure, we’ll do it with a strong human asset retention component. We also have a human resources development programme to retain these skills, as people retire or leave.”

However, these ambitions will have to be fulfilled against a backdrop of reduced State funding. “There isn’t a [government] department in South Africa that hasn’t had to re-prioritise,” he points out. “But we hope to augment our resources so we can continue to provide all the services required for the client and the country.”

Armscor hopes to achieve this augmentation in various ways. Firstly, by providing acquisition services to other government departments and agencies that lie within the security cluster, including the South African Police Service and the Department of Correctional Services. A development of this approach would be to provide acquisition services to other countries within the Southern African Development Community – especially when there are opportunities for collaborative buying of equipment, systems or services, thereby cutting costs.

Then there is the option of “commoditising” Armscor’s nonstrategic R&D. “We have hundreds of IP innovations on our IP register,” he reports. “On IP, you can earn significant royalties. We don’t want to set up companies ourselves, but we could cooperate with [State-owned defence industrial group] Denel or with the private sector.” A further possibility would be for Armscor to act as a broker in government-to-government defence deals. “There is a precedent for this; we would take a handling fee.”

The organisation is also looking at maximising its revenues from its facilities, such as Gerotek and Alkantpan. These two already enjoy a steady flow of local and foreign clients. Furthermore, some of the assets at these facilities, such as accommodation lodges, could be concessioned. And the Simon’s Town Dockyard could also be a future source of revenues.


However, the dockyard is not yet in a position to fulfil such a role. It serves to provide third-line maintenance and refits for the vessels of the SAN. These include both submarines and surface ships (ranging from small craft to frigates and other large vessels). Its capabilities cover, in addition to vessel repair and maintenance, reconstruction, engineering services, dry-docking services, materials laboratory services (chemical analyses, conditioning monitoring, metallurgy and nondestructive testing), spares manufacture, weapons and electronics repair and maintenance, project management and technical training. It is equipped with a medium-sized dry dock (by modern standards; it could accommodate Second World War battleships) and a syncrolift which can take vessels with a length of up to 90 m.

However, for some time now, the SAN has been unhappy with the performance of the dockyard.

“I’m certainly well aware of the problems [at the dockyard]. These problems are related to it being under resourced and understaffed,” reports Wakeford. “We are considering some kind of partnership with the private sector, but it is still being discussed. We are in talks with all the stakeholders and we have set up a task team. Simon’s Town Dockyard is a strategic asset which could build as well as repair vessels. It has done so in the past, for other countries. The dockyard has to be put in a correct position. Fortunately, the DoD is aware of the potential of the dockyard. We want to turn the dockyard around in a very short time. We are heading in the right direction.” The dockyard should be responsible for Level 3 and Level 4 and higher maintenance, while the SAN would handle Levels 1 and 2.

“There’s always room for improvement,” he says, referring to Armscor as a whole. “We’re seeking to realign with market priorities.”

Edited by Creamer Media Reporter

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