Company says that SA's arms deal has put the country's defence industry on the global map

The US defence department is interested in doing business with Grintek defence subsidiary Avitronics, a development the company is evaluating.

Confirming the news, Avitronics MD Ben Ash said the decision needed to be evaluated carefully as it carried considerable risk as well as reward for the company.

If Avitronics were to do business with the defence department, it would be entering a market that has the largest defence budget in the world.

Ash said Avitronics would make its decision known in two to three months after it had completed its evaluation process.

He said that the group was looking at what kind of business formula it could use to operate in North America.

Possible models included bringing in a US partner.

Avitronics said it had benefited "both directly and indirectly" from the industrial offset agreement coming from SA's R60bn arms deal.

While certain aspects of the armaments deal had again come under the spotlight, Ash said it had put the domestic arms industry on the map.

He said that few if any countries had been looking to source their military equipment from SA before the deal.

However, with the deal, Avitronics was now doing business as far afield as Europe and the Middle East. Exposure resulting from the arms deal had led to export orders of more than R800m.

Ash said that up to 150 small and medium-sized businesses had acted as suppliers or performed some other service for his company because of the deal.

Through the deal, Avitronics had employed another 400 people, he said.

Ash said the arms deal had given Avitronics a platform for increased long-term growth.

It had proved a catalyst for a number of joint ventures between the domestic defence industry and international players.

Avitronics is 49%-owned by Swedish technology and defence group Saab.

Saab, which won the contract to supply the SA Air Force with its Gripen fighter jets, would have components supplied by Avitronics fitted into them.

Ash said that Avitronics had gained exposure through Saab to leading research and development, as well as access to markets it could not get into before.

Apart from doing work on the Gripen, Avitronics was also providing some of the components that were now being fitted into the submarines being built for the SA Navy.

An innovation Avitronics had introduced was that the radar warning system that was being fitted to the submarines would now be built on top of the periscope, he said.

Before this, the system had a separate tube, which fitted alongside the periscope.

Built that way, he said, the instrument needed to be raised just above the water to detect activity and to collect intelligence.

Avitronics' system was not only cheaper itself, but it made the cost of the entire submarine cheaper too, because it meant that the separate tube could be dispensed with.

It also meant that space could be saved because the system supplied by Avitronics was smaller.

Avitronics' work on the submarine project saw the company add $16m (R125m) to the group's revenue.

Ash said that Avitronics stood to gain from that deal because the system was now put into the base cost of the submarines, which were being built by a consortium of German ship builders.

The system, which cost millions of rands, was now being operated in submarines in Greece and South Korea.

With acknowledgements to Larry Claasen and Business Day.