R14bn Saudi Denel offer
Saudi Arabia has made a $1 billion (about R14 billion) bid for a broad partnership with state-owned defence group Denel that would include acquisition of a minority stake in a joint venture with Germany’s Rheinmetall, a source familiar with the offer said.
Currently heavily dependent on imports, Saudi Arabia – the world’s third-largest defence spender – is seeking partnerships to develop its own defence industry with the goal of localising half of its military spending by 2030.
Saudi Arabian Military Industries (Sami), the kingdom’s state defence company, told Reuters last month that it was in discussions with major South African firms and aimed to conclude the first deals by the end of the year.
According to the source, who asked not to be named due to the sensitivity of the talks, Saudi Arabia was targeting Denel’s 49% stake in Rheinmetall Denel Munition (RDM).
RDM is a South African-based joint venture formed in 2008 between Denel and Rheinmetall Waffe Munition GmbH, which holds the remaining 51% stake. It specialises in the development, design and manufacture of medium and large-calibre ammunition, including artillery shells.
A Rheinmetall spokesman declined to comment. The German government is currently reviewing all arms sales to Saudi Arabia.
Industry sources said RDM operates independently and is subject to South African law, which means exports from the unit are not subject to German government oversight. Sources said they did not expect a change in ownership would require a German government review.
Under the Saudi offer, Sami would also finance research and development in other Denel divisions, including Denel Dynamics, which produces tactical missiles and precision guided weapons.
Denel and Sami would share intellectual property and under a new joint venture would target defence export markets in the Middle East and North Africa.
Finally, Saudi Arabia – already a top Denel customer for military vehicles, artillery munitions and radar equipment – would purchase a certain amount of the group’s production.
The Saudis expect an answer by the end of December.
“As our discussions are not finalised yet, we cannot provide any comment,” Sami chief executive Andreas Schwer wrote in response to Reuters’ questions.
President Cyril Ramaphosa last week said Denel was “ripe for joint-venture partnerships”, but that the government had not yet weighed the Saudi bid or proposals from what he said were a number of other suitors.
A Denel spokesperson would not comment, saying such negotiations take place on a state-tostate basis.
Ramaphosa’s spokesperson, Khusela Diko, said the president would make a decision once it was discussed by Cabinet. – Reuters