On a growth path
SA’s defence company has proved itself to be viable and profitable despite bad press
Despite a number of negative media stories reported about SA’s defence company Denel, it continued to report a positive performance in the past year and, for the first time ever, has been ranked among the Global Top 100 defence manufacturers and the second-largest defence company in the southern hemisphere.
In the past few months, media reports also criticised Denel for its decision to establish a joint venture company, Denel Asia, with VR Laser Asia, a company said to be linked to the Gupta family. Denel has, however, argued that the joint venture provides the company with a vehicle to penetrate the Asia-Pacific market.
In addition, the company has maintained that all applicable legal requirements were adhered to in setting up this company.
“Defence industry experts estimate that half of future global defence sales will come from the AsiaPacific markets,” says acting group CEO Zwelakhe Ntshepe. In the past financial year, Denel’s export revenue accounted for 58% of the company’s total revenue. Asia-Pacific, Europe, Middle East and South America accounted for the company’s primary export markets.
Spending trends in some of Denel’s markets, says Ntshepe, are reflective of the escalating conflict and tensions in many parts of the world. Expectations are that defence spending in Africa will increase in response to genuine security needs as a result of insurgent and rebel groups, increased piracy threats, economic growth, as well as emerging regional arms races.
“Africa will continue to be critical in our business development strategy,” he says.
A significant investment in research and development — R550m in the past year alone — continues to be critical in terms of positioning Denel for future growth. “In the past year we have worked on a small African regional aircraft concept, as well as a self-propelled G6 howitzer, extending the range and accuracy of some of our missiles and enhancing our vehicle product offering.
We have focused significant attention on developing an African military truck in partnership with the department of defence, Armscor and the Council of Scientific & Industrial Research (CSIR).”
Ntshepe says that operational highlights for the past year include the avionics upgrade of 39 of the SAAF’s Oryx medium transport helicopters. The Oryx forms the backbone of the SA Air Force’s rotary wing transport fleet and has been deployed for peace support operations in areas such as the DRC.
The deployment of the Rooivalk helicopter in active service by the SANDF in support of peacekeeping and enforcement operations in the DRC has focused global attention on the extent and depth of Denel’s capabilities in a highly competitive technology environment, says Ntshepe. “It has revived interest in the long-term positioning of the helicopter, both for the SAAF and potential international clients,” he adds. As a result, the company is in discussions to upgrade the SAAF fleet of the Rooivalk, as well as to develop a new Rooivalk for both the local and international markets. A nextgeneration Rooivalk, says Ntshepe, will strategically position SA’s defence manufacturing industry while at the same time require stronger intergovernment collaboration with selected African markets. Denel Land Systems is in the final phases of the SA army’s new infantry fighting vehicle development programme. Development on the programme will be completed by the end of the current financial year, when 242 Badger vehicles in nine different variants will be delivered to the SANDF. The Mbarc contract for the development and supply of precision-guided munitions has further played a significant role in building up capacity in the SA defence related industry, says Ntshepe. “The project experienced some challenges as a result of its highly complex and technical nature. However, not only did we manage to catch up and deliver
‘‘ WE FOCUS ON FINANCIAL SUSTAINABILITY AS WELL AS IMPROVING PRODUCTIVITY AND OPERATIONAL EFFICIENCIES ZWELAKHE NTSHEPE