SIPHIWE DLAMINI: Demise of Denel is a sovereign risk for SA

The downward spiral of Denel has reached such proportions that it has become part of the new normal: another failing state-owned enterprise (SOE).

The state of Denel, as one of the few entities through which the government incubates high-end technologies for spin-off to the economy and advances the hard science agenda — as well as providing a platform for the pursuit of the fourth industrial revolution — poses a significant strategic risk to the defence and sovereignty of SA.

The demagogues and unenlightened claim there is no role for an SOE in the defence and aerospace sector. This is the same argument used to justify the continued and, some would say, criminally negligent underfunding of the SA National Defence Force (SANDF). This attitude will undoubtedly come back to haunt us in the near future.

Arguably,  we should aim to fund the military at 2% of GDP. The reality, however, is that defence spending for 2021/2022 is 0.86% of GDP — and 14 percentage points below the budget for the previous financial year.

The effect of the year-on-year reduction in allocation is worsened by the continuous and ever-increasing deployment and workload of the military domestically and internationally. The critical contribution by the army to national security and foreign policy objectives seems to somehow escape the attention of those responsible for allocating funding to it.

Calamitous mismanagement has reduced Denel to a shadow of its former self. This is yet another crisis the military and SA will have to face in the near future.

Denel is the original equipment manufacturer for most of the combat systems in the military. It is also the main contractor in the repair and maintenance of the army’s prime mission assets. The state of Denel has introduced significant risk to the defence of the Republic of SA. Not only are maintenance and repairs compromised, but the obsolescence of combat systems has been accelerated. Life-cycle costs are spiralling upwards and serviceability is declining.

However, Denel is much more than that. A quarter of a century ago SA had a thriving defence and aerospace industry, which developed such weapons as the G6 self-propelled howitzer and the Rooikat armoured car held in high regard across the world.

The Rooivalk was the only attack helicopter designed and produced in Africa, complete with its pioneering heads-up display within the helmet visors of its aircrew. This not only improved accuracy, it enabled the use of locally made missile systems on very sophisticated platforms. This led to SA being one of only five fifth-generation missile producers in the world.

The technology innovations developed by Denel and the defence industry in SA were tried and tested under harsh African conditions and found to be some of the most reliable and robust in the world. This led to a huge demand for SA defence technologies, enabling international market access disproportionate to our geopolitical influence.

But it is not solely about the local manufacture of weapons and munitions that are internationally competitive and in some cases class leaders. It’s about the role of the defence and aerospace sector as a ground-breaking, technology-based apex ecosystem in our economy. For every innovation in this sector, there is invariably a spin-off to a vital civilian application. GPS and the internet are two obvious examples that have their origins in the defence sector.

Let us not forget the array of smaller businesses that depend upon Denel. These businesses would not be able to survive should Denel collapse.

This holds true for the incredible galaxy of innovators, scientists, engineers and technicians who once called Denel home. After one-too-many missed pay cheques, many members of this intellectual elite have gone, driven to seek greener pastures in the interests of survival. Their opportunities, due to the nature of the industry, are more often than not in foreign countries, which benefit from the investment SA made in its people and its skills and hard sciences.

Six years ago, Denel was the poster child of how SOEs could, and should, be run. Sadly, it has become the poster child of catastrophic failure. Shame on us for not intervening a long time ago.

The 2020 Aerospace and Defence Masterplan lists almost a dozen projects that would be beneficial to the defence industry if they were to continue. The biggest of these is the production of the long-awaited Badger infantry combat vehicle for the SA army.

Mismanagement, coupled with defence budget cuts, has had a fatal effect on the delivery and timelines assigned to this project.

Other projects are critically important from both the army and Denel’s perspectives: the creation of a new, locally designed and produced truck family to replace the Samil trucks, with us since the 1970s, and the production of a new set of armoured mine-protected personnel carriers to replace the ageing Casspir and Mamba fleets. These were intended for allocation to our private sector manufacturers in the long-term through life cycle industrial participation initiatives.

The loss of Denel will grievously impinge on our sovereignty because we will be dependent on foreign defence manufacturers and countries. The whole point of developing a very strong defence industry was to avoid being dependent on the goodwill of other countries.

SA’s defence and aerospace industry should be a national imperative, along with a commitment to adequately fund the military. But of the two, perhaps the most pressing is the plight of Denel. Its failure would have dire consequences for the ability of the army to carry out its constitutional mandate — safeguarding the sovereignty and territorial integrity of SA.

It is not in our interest as a country to let it fail.

• Dlamini is head of communications at the department of defence. He writes in his official capacity.