South Africa

The South African defence budget for financial year (FY) 2016/2017 was expected to reach some 47.2 billion South African Rand -ZAR- (approximately 3.6 billion US dollars) equivalent to around 1.05% of the country’s Gross Domestic Product (GDP), significantly increased compared to FY 2015/2016, when the country spent some ZAR 45 billion (approximately 3.4 billion US dollars). According to South Africa’s authorities, the defence budget was to be further increased in FY 2017-18 and FY 2018-2019 to 48.7 (3.7 billion US dollars) and 50.7 billion ZAR (3.84 billion US dollars) respectively. In the foreseeable future, according to recommendations from various sides defence spending should aim to reach 2% of the country’s GDP.

The Aerospace and Defence (A&D) industry of South Africa has developed several advanced capabilities in recent times. More specifically, the country’ defence industry has developed a strong set of core competencies in the following three domains: weapon systems, including weapons for aircraft, helicopters, ships, vehicles, artillery and infantry; communications, including secure communications, electronic warfare, radar and information technology; the design and development of avionics sub-systems for fighter aircraft and attack helicopters. Furthermore, a number of local companies have competences in providing vehicle systems, simulators, unmanned aircraft and logistics’ services. On the other hand, the aerospace industry consists of a large number of business and research entities which provide a wide range of products and/or services, such as aircraft materials, parts and components for commercial and military aviation, propulsion systems, avionics, sensors, ICT systems, maintenance, repair and overhaul (MRO) services, etc.

Additionally, South Africa’s defence industrial base contains various types of entities, including: state owned defence companies such as Denel SOC Ltd. and the Council for Scientific and Industrial Research (CSIR); Research and Development (R&D) facilities such as the Institute for Maritime Technology (IMT); Industrial facilities of the Armed Forces, such as Simon's Town Dockyard; and several private owned companies.

According to a report published by the South African Aerospace, Maritime & Defence Industries Association (AMD) the annual turnover of the local defence industry in 2012, was ZAR 13.3 billion (approximately 1 Billion US dollars), compared to ZAR 10 billion (approximately 754 million US dollars) in 2008. In 2014, the turnover of the defence industry increased to ZAR 15.8 billion (1.19 billion US dollars). In 1995, nearly 29% of the defence output of the South African defence industry was exported. In 2012, total defence exports were significantly augmented, reaching 67% of the total production. More recently, exports in 2015 amounted to ZAR 9.1 billion (687 million US dollars). Additionally, it is worth mentioning that the sector invests roughly ZAR 1 billion (approximately $75 million US dollars) in research and development (R&D) annually and provides employment to some 15,000 highly skilled personnel.

One of the most important companies in South Africa, is Denel SOC Ltd., a state-owned commercially-driven company which comprises of several defence and aerospace divisions and associated companies. Denel manufactures among others, arms and ammunition, missiles, aero-structures, unmanned aerial vehicle systems and optical payloads. A business unit of Denel, Denel Land Systems (DLS) and its subcontractors, is to manufacture the 217 infantry combat vehicles for the local armed forces, as discussed in previous. More on that, the turret and weapon systems of the vehicle are also be developed and manufactured by DLS.

In order to further enhance the technological level of the local defence industry, South Africa’s authorities have promoted the creation of cooperative schemes with foreign partners. Under this context, Saab Grintek Defence (SGD) was founded as a company co-owned by local South African interests and SAAB AB, the latter being the major shareholder (70%), through its local subsidiary SAAB South Africa. Currently, the company provides solutions to a wide range of sectors, ranging from conservation, mining and health support services to peace-keeping, air traffic control and weather forecasting. Overall it employs 650 staff across its two facilities, in Pretoria and Cape Town.
The interests of the South African defence industry as a whole, are represented by the Aerospace, Maritime and Defence Industries Association of South Africa (AMD). It should be stressed that some of the latest technological advances within the country, in several industrial sectors, are partial spin-offs of technological developments in the country’s A&D industry. On the other hand, the local A&D industry, contributes significantly to employment and skills development of the country’s human capital, by training engineers that may later also be employed by other industrial sectors, such as construction, transportation and power-generation.