South African Defense Industry
The origins of the domestic defence related industries can be traced back to the 19th century, but it was only during the Second World War that substantial quantities of armaments were manufactured locally (5 770 armored cars, 600 guns and 30 000 military vehicles) to support the Allied war effort. Local development of armaments was also undertaken: notable achievements were the MK1 armoured car and the JB1 radar. After the war most of the wartime factories converted to their pre-war civilian activities although a very modest defence industrial base was retained.
In the early 1960's the government decided to expand the defence related industries in the face of increasing international isolation as a result of apartheid and growing resistance domestically and in the region. At that stage armaments production was largely in the hands of private industry. The first step was the establishment in 1964 of a statutory body, the Armaments Production Board, that was responsible for both acquisition for the SADF and the establishment and management of public sector defence related industries. The Board was also tasked with the co-ordination of arms production in the private sector, and by the mid-1960's nearly 1000 private sector firms were involved in various aspects of domestic arms production.
The new Government of National Unity in 1994 faced the dilemma of whether to dismantle the defense industry many of its leaders had reviled for two decades or to preserve a lucrative export industry that still employed tens of thousands of South Africans. After some debate, President Mandela and Minister of Defence Joe Modise decided to maintain a high level of defense manufacturing and to increase military exports in the late 1990s. The industry, they argued, would benefit civil society in areas such as mass transportation, medical care, mobile services, information management, and other areas of infrastructure development. Increasing defense exports, they maintained, would bolster foreign currency reserves and would help reduce unemployment. Moreover, they pledged that military exports to other countries would require cabinet approval and verification by Armscor; and, they promised, arms would not be sold to countries that threatened war with their neighbors.
The Department of Defence (DoD) prepared a White Paper on Defence, which was approved by Parliament in May 1996 and formed the policy framework for defence. Chapter Seven of the White Paper on Defence addressed arms control and the defence related industries, and stated that government wouldprepare a White Paper on the defence industry. The DoD began such preparations within the context of the Defence Review, which built upon the policy framework of the White Paper on Defence.
On 21 August 1996 Cabinet tasked the National Conventional Arms Control Committee (NCACC) to initiate and oversee the preparation of a White Paper on the South African defence industry. On 12 November 1996 the NCACC set out in a memorandum what the broad contents of the White Paper should be.
The term `defence industry’ is widely used internationally, sometimes interchangeably with `armaments industry’ and ‘defence suppliers’. However, the term ‘defence-related industries’ in some ways is more accurate, since there is a growing tendency for companies producing defence equipment to make use of civilian technologies, or to manufacture dual-use products which can be sold to both defence and non-defence markets. There is also an increasing overlap between defence and civilian production within companies, both nationally and internationally.
While there is no clearly defined ‘defence industry’ as a distinct industrial sector, it is evident that the production of armaments for use by national defence forces, and related activities, requires special control measures by governments and forms an identifiable cluster of activities which are recognisable globally and to which some specific economic and political processes apply.
South African defence-related industries are those clusters of organisations in the public and private sector, and commercial companies and business units of such organisations, which are directly or indirectly active in the provision of goods and services to security forces which are defined as armaments. This provision can include research, design, development, production, assembly, test, evaluation, upgrading, procurement, export, import, maintenance, logistical support, human support or project management. The defence-related industries are mainly involved in the material, mechanical, electrical, electronic and chemical sectors of the manufacturing industry and produce armaments for both domestic and international clients.
Armaments are as any vessels, vehicles, aircraft, ammunition and weapons, as well as substances, materials, raw materials, components, equipment systems, articles, techniques or services, that are designed, modified or adapted to be utilised to equip, maintain or support security operations, or which are usedin the development, manufacture or maintenance of such armaments.
Defence related industries are an integral part of South Africa's defence capability. Government also recognises the strategic and defence value of having a local defence industrial capability. However, due to budgetary constraints, and within the framework of broader national industrial strategy, government will be very selective of which technologies and capabilities are to be retained on the basis that they are strategic or that they constitute a national asset.
The South African Government, as a responsible member of the international community, perceives South African defence industrial capabilities as being singularly different from other components of the national industrial base for two reasons. Firstly, the South African defence industrial capability has strategic importance for the national defence interest. Only certain key components have such strategic characteristics, however. Secondly, the output of South Africa’s defence industrial capability, be it products, services or technologies, have to be subject to government control.
The domestic defence market, as measured by domestic acquisition spending, declined by over 50% between 1989/90 and 1996/97, with an average decline of 10% per annum. This decline is directly attributable to the defence budget cuts of over 50 % during this period. Purchases by Armscor from the local defence related industries peaked at R3,6 billion in 1989/90 (1990 Rands), declining to R1,7 billion in 1996/97. State-owned Denel and three large private sector industrial groups - Altech, Reunert and Grintek, dominated the domestic defence market. These four companies accounted for over 90% of domestic acquisition spending at the turn of the century. The remaining 10% is accounted for by hundreds of small and medium firms.
The SANDF has subcontracted nearly all of its logistic support base to industries doing defence work, primarily due to the fact that the SANDF does not have, and is not likely to have, the skills necessary for these logistic services. The current industry role of maintenance, logistic support and battle damage repair will assume a greater prominence. Defence forces internationally cannot afford to retain scarce and therefore expensive technical skills in the abundant way they used to. It has become sensible, in terms of economy of scale, to locate such skills in clusters within industry and outsource major maintenance and support to such industries. Without these industry capabilities the defence force would be completely inoperable, particularly in the a time of national defence.
These technologies and capabilities are primarily situated in the industries associated with the major systems in use by the SANDF, e.g. the aeronautics industry for military aircraft, the vehicles industry for military vehicles, the electronics industry for radar, communication and other military electronic systems, the ammunition industry for weapons, etc. Due to South Africa’s geographic position it is essential, and generally cost effective, to be self-reliant in the maintenance and support of major weapons systems, including battle damage repair. In the past, all new major system purchases, especially those procured from overseas suppliers, have included the establishment of a total logistic support base in South Africa, together with the necessary training.
The DoD believes that domestic defence related industries may help to maintain independence from possible foreign coercion in times of tension. In certain strategic areas, such as electronic warfare and secure communications, and when equipment needs to be developed specifically for local conditions, systems and services are not available on the international market. Preference is therefore given to the procurement of defence products and services from local suppliers, providing such procurement represents good value for money.
The dilemma facing the SANDF and the local defence related industry is that their capabilities are inclined toward the high technology orientation of the developed countries, while the African environment is characterised by serious developmental backlogs. Most of Africa will, even under the most favourable conditions, take several decades to develop an industrial and technological base even approaching that of a developed country. Until that base is established, advanced military capabilities will not be sustainable.
To configure the SANDF for the mode of conflict of a developed country would therefore be inappropriate to African realities. Under present budgetary restrictions it is also un-affordable. The ideal would thus be to acquire from the local defence technology base only those advanced technologies that are appropriate to and have a distinct force multiplier effect in lower level conflict, and as needed to combat new threat patterns. Defence related industries face the added complication that, in addition to supporting a hybridized defense.
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