While offset deals allied to the SA arms deal provide business for the local defence industry, companies have to use the deal as a launching platform for future deals to benefit in terms of generating sustainable business.

Paul Gerber, group manager business co-ordination at Grintek, says exports are essential for a sustainable defence business, and the creation of relationships with international defence companies is a key ingredient for future success.

Grintek Avitronics is exporting 70% of its production.

"While the export business has been caused by the arms deal, none of it is a part of the deal," Gerber says.

He says SA companies have to look beyond the business generated by the arms deal.

Typically, the items that form the major portion of the arms deal, such as aircraft, submarines, ships and helicopters, tend to stay in service for 20 to 30 years.

Therefore, apart from upgrades, additional expenditure is limited to service and support.

"As a result, we have to take a long-term view and reach out internationally. Our local market cannot support the infrastructure and engineering expertise that is needed to ensure a viable defence industry.

"To compete successfully on the international market you must have the right product at the right price and be able to deliver on time," Gerber says.

Stuart McIntyre, executive director SA for BAE Systems, says the defence offset programme is finite one and it will end.

"The challenge for SA industry is to use its exposure to a wide range of international players to develop continual relationships on a commercial basis," he says.

McIntyre says there are already examples of these relationships, such as the Grintek/Saab relationship that started as a result of the defence/industrial participation programme on the Gripen aircraft.

Another example is Aerospace Monitoring Systems.

The participation of the company in the SA arms deal has led to its selection to provide its systems to Hawk aircraft in Australia and Canada, as well as winning other deals.

"The offset deals associated with the SA arms deal provide a window of opportunity for SA companies to develop relationships. SA industry has developed an innovative approach to technology development and it has better solutions in many areas than those developed by overseas players at 10 times the cost."

With acknowledgement to Business Day.