A PROJECT DOGGED BY CONTROVERSY…
IT WAS dubbed “Project Continental” – a grand vision of South Africa spreading its wings of peace over Africa – backed up by 14 of the world’s biggest military aircraft.
And the Airbus-led project to develop the massive A400M Airbus heavy-lifter freight planes represented the largest joint project ever undertaken by European military aircraft manufacturers. Involving British, German, French, Spanish, Turkish, Belgian and Luxembourgian interests along with South Africa in the joint partnership, the A400M has an order book of some 200 aircraft – mainly from the venture partners, but also from developing countries including Chile.
Grand though its conception may have been, however, the A400M has been dogged by controversy, and recently major partners, including Britain and Germany, threatened to pull out of the deal, in the face of delays and cost escalations. Notable among the causes for these has been the bureaucratic insistence by European governments on using turboprop engines of European manufacture to drive the goliaths of the skies – rather than the originally slotted Canadian Pratt and Whitney engines, universally acknowledged to be cheaper, more efficient and more fitted to requirements than anything of European origin.
The viability of the Airbus project has also been placed in question by the fact that competitors, notably Boeing, are delivering transport aircraft at significantly lower prices – though with a lesser payload, cruise speed range and the A400M’s capacity to transport fully assembled tanks.
Last week Armscor chief executive Sipho Thomo entered the fray, claiming before Parliament that the eight A400M’s ordered by the South African military would set the country back by R47 billion – as opposed to the original R7.4bn estimate in 2004, and the R17bn estimated when the deals were finally signed off in 2005.
In the outcry which followed, however, it emerged Thomo was factoring in the “throughlife” costs of the aircraft – the costs incurred over the 30-year lifespan of the planes, as well as the cost of chartering flights for peace- keeping deployment given the four-year delay. Also included in the Thomo figure was the cost of maintenance and spare parts, as well as the financial burden of phasing out the aircraft after 30 years.
An industry source confirmed that the government had decided to use throughlife costs as part of its costing process after having burnt its fingers with estimates on the strategic defence package known as the Arms Deal, which it now cannot properly maintain and operate.
The figures were drawn from a confidential bargaining position drawn up for South African negotiators to thrash out a better deal with their Airbus partners.
Defence Minister Lindiwe Sisulu slammed Armscor’s disclosure of the bargaining stance, saying it had jeopardised prospects of securing an affordable deal, and placed in question South Africa’s standing as an honest negotiator in the eyes of Europe.
South Africa is withholding a further payment of R1.1bn pending the outcome of negotiations, likely to be concluded within the next week. If it continues to play hardball, the South African government is likely to forfeit the R2.9bn already paid from the secret Special Defence Account for the Airbus project – not to mention its international credibility in the aerospace community. The state has invested substantially in the industrial participation of South African companies, but the total amount is not known.
The Special Defence Account – from which the first payment for Airbus was made – is projected to grow over the medium term to R1.8bn in 2011/12, doubling from five years back, with the lion’s share going to the procurement of defence equipment.