Navy hoping to revive SA's shipbuilding industry

27th February 2009 By: Keith Campbell - Creamer Media Senior Deputy Editor

THE South African Navy (SAN) hopes to use its requirement for six new vessels to help revive the local shipbuilding industry (see Engineering News February 20, 2009).

The programme will involve the construction of three offshore patrol vessels (OPVs) and three inshore patrol vessels (IPVs).

It is necessary to point out that South Africa does have a shipbuilding industry, but it is very small, not only in comparison to the overall manufacturing sector, but also in comparison to the country's ship-repair and refit industry. Yet, with the right encouragement, shipbuilding could be a much bigger business in this country. The Navy is clearly determined to do its bit, but recognises that what it can directly do is limited, given the small number of ships it seeks.

What the Navy hopes is that other African countries, which also need new OPVs and/or IPVs, will chose the same design selected by the SAN and have them built in South Africa. To this end, the SAN has invited other African navies to send officers to join the South African project team working on the OPV/IPV programme.

This is excellent, but far from enough - but it is also as far as the Navy can go on its own. There is the question of how African navies will finance such acquisitions.

The case of the Namibian Navy is instructive. Last month, it took delivery of a 200 t patrol vessel and two 45 t patrol boats from Brazilian private-sector shipyard Inace, as part of a deal managed by Brazilian State-owned company Emgepron. These vessels should arrive in Namibia next month (March). Two more 45 t patrol boats will be handed over next year. The total contract for the five vessels was reported to be worth $35-million.

The Brazilian Navy has been assisting with the development of the Namibian Navy since 1994. Also, in 2004 the Brazilian Navy transferred an old, but still fully operational, 900 t patrol ship to the Namibian Navy, free of charge.

Yet, despite all this assistence, what swung the contract for the new vessels Brazil's way was the fact that the Brazilian National Bank for Economic and Social Development (BNDES) provided Namibia with a favourable financial package to fund the deal.

Namibia provides another, parallel, example. The country's Ministry of Fisheries and Marina Resources had a 1 400 t patrol ship built in the Freire shipyard in Spain (it was ordered in 1999 and delivered in early 2004) - it was funded through the Namibian-Spanish financial cooperation programme.

So, if South Africa is to be able to sell locally-built OPVs and IPVs to African navies, the country must be able to supply the necessary financial packages as well. The Industrial Development Corporation (IDC), or some other local funding agency, must be ready and willing to provide suitable deals in realistic time scales. And the interest rates must be competitive.

I have often been told that the IDC charges market rates for its loans, which I have always found odd - it is, surely, primarily meant to promote national industrial development, and only secondarily to make a profit? In sharp contrast, the BNDES charges interest at rates that are far below market levels, and has always done so. Other countries also have funding agencies that can offer African countries below-market-rate financing to order vessels from their shipyards. And a number of these are interested in providing OPVs and IPVs to African navies.

Not to mention those countries that might supply such vessels, particularly IPVs, free of charge. That is what Australia did for the small navies, coast guards, and police forces, of the South Pacific island nations. From 1987 to 1997 no fewer than 22 examples of the 162 t Australian-designed and built Pacific Patrol Boat were built and given to these countries. Subsequently, from 1997 to 2003, they all received mid-life refits in Australia, and in 2000 the Australian government announced that it would continue to support the patrol boat programme until 2027, at a cost of some Aus$350-million.

In addition, all the abovementioned programmes enjoyed high-level political support in the supplying country. Thus, the Brazilian programme took place within the framework of a formal, bilateral, naval cooperation agreement. The deal for Namibia to acquire a vessel from Spain was concluded during a State visit to the country by the King and Queen of Spain. And, of course, the Pacific Patrol Boat programme was and is an Australian national policy, decided by the Federal cabinet.

It is a tough environment out there, and if South Africa is to compete successfully and build OPVs and IPVs for Africa, which needs them badly to protect its growing offshore resource sectors and counter the rapidly expanding threat of piracy, it must not only have suitable designs and the necessary shipyards. It must also have the necessary financial packages, and high-level political backing.

The SAN's idea is a good one, but it needs other State departments and agencies to come on board as well, if it is to have any chance of success.