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Hoefyster (Horseshoe) / Badger

A replacement for the Ratel infantry combat vehicle, Hoefyster is an R8-billion contract for a total of 264 Badger infantry combat vehicles (ICV) for the SANDF, based on a Finnish vehicle by Patria with a South African-designed turret from Denel Land Systems. The hulls are manufactured under licence in South Africa. The initial prototype hulls were imported. The Gupta family allegedly took control of Denel through its company, VR Laser.

Denel Land Systems designed and manufactured the Badger to meet the requirements of a modern army involved in both high-intensity warfare and peace-keeping operations. The Modular Combat Vehicle (MCV), originally developed by the Finnish defence contractor Patria, has subsequently been optimised by Denel Land Systems in order to meet the specific needs of the South African Army. This localised vehicle inclusive of turret variants is called Badger as part of Armscor’s Project Hoefyster that seeks to replace the 30 year old Ratel Infantry Combat Vehicle in its mechanised infantry units.

Hoefyster [English word for the Afrikaans word hoefyster is horseshoe] was registered as a project in 1997. Rumors regarding the demise of the program circulated for years, driven by a lack of news on the project and apparently interminable delays.

Early reports speculated that the MOWAG Piranha IV was a shoo-in for the deal, as OMC had then just been bought out by Vickers Defence Systems – a British concern – that had licensing rights to the Piranha IV. Counter-speculation at the time favoured the Piranha III, currently in use by the US Army as the Stryker basis for the armored personnel carrier (APC).

The Request for Proposals (RfP), reference number MFT/2003/564, asked eight South African companies and four international defence contractors to put forward ideas and quotes by February 25, 2005. Domestic companies asked to tender were state arms manufacturer Denel as well as private companies LMT, Benoni-based OMC, IST Dynamics, Industrial and Automotive Design SA, MDB, Advanced Technologies & Engineering of Midrand, Grintron and Intertechnic. The four overseas contractors approached were GIAT Industries of France, Mowag Motorwagenfabrik AG of Switzerland and the pan-European Aeronautic, Defence and Space Company (EADS).

In February 2005, when the bids were due, only one was received, from a consortium involving Patria of Finland, Patria's part-owner, EADS, Denel, OMC and Land Mobility Technologies (LMT). The vehicle the group proposed was Patria's 8x8 Armored Modular Vehicle (AMV), as redesigned for southern African conditions by LMT. The vehicle hulls were to be built by OMC and the turrets as well as guns would be provided by Denel.

Denel Land Systems [DLS] was contracted in May 2007 to supply the vehicle in five variants: section carrier, command, mortar, support and anti-tank. A R1 048 billion order to develop a prototype of each was awarded later that same month. One of each underwent evaluation. Once accepted by the military, 12 pre-production vehicles will be built. The first 37 production vehicles will be built by Patria in Finland.

The Army in October 2010 awarded DLS at Lyttelton in Pretoria a further R9.9 million to continue the development of the Badger infantry combat vehicle (ICV) products system under Project Hoefyster. "Hoefyster project has not been shelved," the ministry said in a written answer to a Parliamentary question by Congress of the People MP DB Veldman. "In accordance with the contract, Denel Land Systems (DLS) is still implementing the Development Phase of the contract," the ministry added. "The Department of Defence will make the decision on whether or not to proceed with the Industrialisation and Production Phase before the end of 2010/11."

Project Hoefyster was done in a phased approach. The first phase was for the design of the prototypes which had to meet the client specifications fully. The prototypes did not meet this target and failed some critical specifications which needed to be corrected. The vehicles in the photo were pre-production vehicles. Phase 1 had to be completed in 2012. Because phase 1 was not completed there was an overlap with phase 2.

In 2013 the Minister of Defence and Military Veterans, Nosiviwe Mapisa-Nqakula, approved the production phase of “Project Hoefyster” for 238 “Badger” infantry combat vehicles, over a period of ten years, for the Defence Force. The production phase of the project was approved following the development phase of the “Badger” infantry combat vehicle, which was completed in 2010 and cost R1.3 billion. The estimated cost of the development and production of the 238 “Badger” infantry combat vehicles could be more than R10 billion. This means that each “Badger” infantry combat vehicle could cost approximately R42.5 million. In the end, the R10 billion estimated cost of the 238 “Badger” infantry combat vehicles is probably a conservative estimate.

These figures were derived as follows:

• Assuming the production cost of 264 “Badger” infantry combat vehicles was R8 400 000 000 in 2011 as set out in Denel’s 2012 annual report;
• Adjusting the production cost of the 264 “Badger” infantry combat vehicles for inflation, using official inflation rates, to R9 767 197 440;
• Calculating the unit cost of a “Badger” infantry fighting vehicle, by dividing R 9 767 197 440 by 264, to arrive at a unit cost of R 36 996 960;
• Calculating the cost of 238 “Badger” infantry combat vehicles, by multiplying the unit cost of R36 996 960 by 238, to arrive at total estimated production cost of R 8 805 276 480;
• Adding the development cost of R 1 300 000 000 to the estimated production cost of R 8 805 276 480 to arrive at a total estimated contract cost of R10 105 276 480; and finally
• Calculating the unit cost of a “Badger” infantry combat vehicle by dividing R10 105 276 480 by 238, to arrive at an estimated unit cost of R 42 459 144.

The “Badger” infantry combat vehicles will be produced by Denel, working in conjunction with a Finnish company, Patria, and will replace the 30-year old Ratel infantry combat vehicles, currently used by the Defence Force. More than 2 000 jobs are expected to be created as a result of “Project Hoefyster”.

Riaz Saloojee, Denel’s group chief executive officer, described the project as “the most significant defence contract signed with a South African company in the last 10 years”. It is, therefore, a concern that a major defence acquisition project was approved before the completion of the Defence Review; and that the total cost of the defence acquisition project has never been disclosed to Parliament. In fact, at a Portfolio Committee on Defence and Military Veterans meeting, on 06 November 2013, the Defence Department refused point-blank to reply to any questions about the cost of “Project Hoefyster”.

The first prototype of the Badger vehicle was delivered in 2010 to the ARMSCOR and the SANDF. The modifications, integration and testing were to make the vehicle suitable for the SANDF requirements. Of the 238 Badgers on order, the first 18 hulls would come from the Patria production line in Finland. The Badger was to enter production by early 2015 and will replace the Ratel IFVs (also known as Honey Badger) by 2022. By early 2015 the first complete Badger system was set to be delivered to the Army in late 2016.

January 2016 saw the first real major project milestone in the production process of the SA Army’s new infantry fighting vehicle – the Badger. “We have reached the stage of Product Baseline One (PBL One),” an obviously elated Stefan Burger, Denel Land Systems (DLS) chief executive, said. This milestone comes on the back on of extensive testing, including an especially arduous one called “bush break” when test drivers do “their damndest” to physically break the vehicle. Burger reports the Badger that underwent the test, one of 13 units currently at DLS in Lyttelton, Centurion, came through with flying colours.

Denel was contracted by the local customer for the development and production of the new-generation infantry combat vehicle product system (Badger), namely the Hoefyster project. By 2016 the development phase was near completion with the base-line of the section variant being released for series production. The production phase was contracted in 2014, to be executed over a period of ten years and is largely on track with the first complete systems set to be delivered towards the end of 2016/17. The base value of the programme is R9.4bn and revenue of R676m (2014/15: R350m) was recognised during the 2015/16 financial year.

On 27 November 2019 the Portfolio Committee on Defence and Military Veterans held Denel to account on the challenges on the delivery of the Hoefyester project revolve around the levels of programme managers in Denel at the time. The committee also heard that Denel was never ready to manage the project, the none existence of the necessary skill-sets needed for the project was one of the main reasons the project had cost overruns and, as at times, engineers responsible for project management would be involved in financial management. Mr Xaba said that “more than 40-month delay in the delivery on the project has resulted in Denel incurring R65 million penalty”. The information which Denel made available includes the latest agreement between the entity and the Armaments Corporation of South Africa (Armscor), and whether the infantry fighting vehicles envisaged at that time are still useful.

The committee questioned the entity’s continuous delays in the delivery of the Hoefyster Project which is meant for the revitalisation of the South African Army’s infantry fighting vehicles and several other projects. The committee heard that the challenges on the delivery of the Hoefyester project revolve around the levels of programme managers in Denel at the time. The committee also heard that Denel was never ready to manage the project, the none existence of the necessary skill-sets needed for the project was one of the main reasons the project had cost overruns and, as at times, engineers responsible for project management would be involved in financial management.

Mr Xaba said that “more than 40-month delay in the delivery on the project has resulted in Denel incurring R65 million penalty”. The information which Denel made available includes the latest agreement between the entity and the Armaments Corporation of South Africa (Armscor), and whether the infantry fighting vehicles envisaged at that time are still useful.

Project Hoefyster, for the supply of 243 Badger infantry fighting vehicles for the South African Army, is nine years behind schedule with little hope that the project will be turned around due to major challenges at Denel. This is according to an Armscor presentation to the Parliamentary Joint Standing Committee on Defence (JSCD) on 11 March 2021. Sipho Mkwanazi, Armscor acting group executive for supply chain management, told the committee that the first 88 vehicles were supposed to be completed by Denel Land Systems by May 2019, with service entry by 2022, but the project has been delayed by nine years (under original 2007 projections).

“The unfortunate thing is that there seems to be a misalignment on progress status between Denel and Armscor,” said Standing Committee co-chairperson Cyril Xaba. “The committee has called on all the parties involved to converge and agree on where the project is, and what is the best way forward.” The delays in the project had been accompanied by an escalation in its costs. This, too, was a cause for concern because the defence acquisition budget was shrinking.

On 28 May 2020 Denel briefed the Committee on its Department of Defence (DoD) projects, spoke to the challenges in Project Hoefyster, namely the scope and complexity of the project leading to the technical integration of sub-elements being time consuming. It covered the spending on the project and the status of deliverables to date including the status of Phase 1 and of Phase 2. It spoke on Denel’s capability to deliver on the project and said that while Denel had the internal capability to deliver, some external skills were negatively impacted by the project’s delays and by Denel’s financial position resulting in some suppliers no longer existing and components would need to be sourced and industrialised again to ensure integrity in supply. Other challenges Denel faced, were a liquidity crunch, the closure of VR Lazer and the fact that project delays created misalignment at the programme level leading to decision making time taking longer than necessary. It spoke to programme spend on Phase 1 Development, and on Phase 2 Production, as well as on the development and production schedules of Phases 1 and 2. It gave reasons why the project should continue and the lessons learnt to date. It concluded with contract alignment actions taken between December 2019 and April 2020 where the premise for the Denel proposal was to engage with Armscor to align the contract with current realities as the contract currently has delivery dates in the past that could not be achieved.

Armscor said the challenges faced by Denel on Project Hoefyster was on the integration of the turret, which resulted in the project being four years behind schedule and these integration challenges needed to be looked at very closely. Denel had said it would not be able to meet the specification nor be within budget. The budget Denel proposed would be unaffordable to the Armscor client (DoD) and certain key requirements were not met which would be catastrophic for the client. Armscor had been meeting with Denel. It felt Denel’s presentation had been highly optimistic and certain decisions would have to be taken on Project Hoefyster around salvaging the project. Project Hoefyster was 45 months behind schedule and R7.3bn had been paid to date. In the latest proposals, Denel was still unable to complete Phase 1 Development and the cost of completing the project was not affordable to both Denel and to the client (DoD) and a decision to cancel the contract needed to be taken as any delay in making a decision increased the risk to the DoD.

Mr Daniel Du Toit, Group CEO: Denel, replied that the most important action was that there was a need for a better alignment between Armscor and Denel. Denel was actively engaged in seeking solutions. A common executive committee had been established but more work needed to be done going forward. He said the new Denel management team was committed to fixing the issues. On Mr Mkhwanazi’s comments on the affordability of the project, he said Denel was willing to find solutions. Project progress was significantly late, but Denel had the capacity and the capability to do the project and good progress had been made in the last 15 months.

The company had been financially distraught since a Gupta aligned board was appointed in 2015. That board and executives in Denel appointed VR Laser, a company owned by Gupta associate Salim Essa and Duduzane Zuma. VR Laser was awarded a tender to assist in manufacturing platform hulls for the Hoefyster project at R100 million than Land Mobility Projects (LMT), a subsidiary of Denel Land Systems (DLS). Armscor has submitted penalities worth R200m on Denel for failing to deliver on time. A total of R1.5 billion had been spent on Hoefyster by Armscor by 2020, at which time Denel was seeking a R3.8 billion bailout from government to become fully operational again.

Armscor briefed the Joint Standing Committee on Defence (JSCD) on 11 March 2021. Badger vehicles are supposed to be delivered in five initial variants (Section, Mortar, Missile, Fire Support and Command) and five new variants (Basic Artillery Observation System, Artillery Tactical Command Post, Enhanced Artillery Observation System, Signal and Ambulance). However, at present, Armscor said development of hull and turret items common to all variants stands at 72% complete. Development of the Section variant stands at 83%; the Fire Support variant at 83%; the Command variant at 72%; the Mortar variant at 44%; and the Missile variant at 53%. All work on the five new variants is on hold. Armscor said Denel is experiencing huge challenges with the mortar and missile variants.

Industrialisation is behind and continued to slip. This has particularly been affected by the liquidation of VR Laser, which meant Denel Vehicle Systems must be industrialised to manufacture hulls and turret hulls in-house. Industrialisation is on hold due to parts shortages due to the non-payment of suppliers – suppliers are not prepared to supply Denel.

Denel’s success in the development of the Badger contributed to the signing of a major export contract with Malaysia to deliver similar infantry fighting turrets to its defence force.

Denel is unable to complete Project Hoefyster for new Badger infantry combat vehicles for the South African Army due to insufficient capability, and consequently Armscor has recommended the contract be cancelled and the money be spent on Ratel upgrades. This emerged during a presentation to the Portfolio Committee on Defence and Military Veterans by defence materiel agency Armscor on 16 February 2022.