Local orders and exports both essential for the South African defence industry

Local orders are key to winning export contracts in the defence sector, Denel Land Systems (DLS) CEO Stephan Burger affirmed at the Aerospace, Maritime and Defence Conference in Pretoria on Thursday. He cited the case of the order his company received for turrets for the Malaysian Army's new armoured fighting vehicle, the AV8.

These turrets were developed as part of the South African Army's Project Hoefyster ("Horseshoe") to acquire a new infantry fighting vehicle. The resulting vehicle is called the Badger, and, although the hull is based upon a Finnish design (the Patria AMV), the different types of turret that will equip the five different variants of the vehicle, and the weapons they carry, are South African designs. The entire Badger vehicle and most of its systems are made in South Africa.

The order from Malaysia is currently worth some R5-billion and covers three turret types. Two of these are Denel designs, one mounting Denel's GI30 30 mm gun, and the other both the GI30 and Denel Dynamics Ingwe anti-tank missiles. The third turret is a remotely-operated weapons station from Reutech, mounting a 12.7 mm heavy machine gun.

DLS received the order to develop the Badger in 2007. It was four years later, in 2011, that it won the Malaysian order. "In big system orders, you have got to talk to the user, you have got to talk to the decision-makers, you've got to talk to the politicians," he pointed out. "You have got to have a competitive advantage."

Previously, South African industry's comparative advantages were cost, quality, performance and the fact that its products were battle-tested. And these, he observed, worked well for a long time. But today there are many competitors who can also compete on cost, quality, performance and who have battle-tested products.

"So," he reported, "our current competitive advantages are -- job creation in the [client] country, the creation of strategic capability, the transformation of [the client's] industry and upgrading and autonomy [for the client's capabilities]." Or, in short, offsets.

And this has been the case with the DLS turrets for the AV8. These are fully assembled in Malaysia, using components supplied from South Africa. "This is no longer a South African product. They are now marketing this product [in other countries] on our behalf."

When DLS was set up, it was a lossmaking business. This was still the case when it won the Badger contract. "DLS is now above break-even point, due to exports," he highlighted. "And our biggest single export order is for the turrets developed for the Badger."

"Export is a prerequisite in maintaining this strategic [defence industrial] capability," asserted Burger. "Clients can either become your biggest competitor or your best partner; chose them well!"