South Africa Facing Transition Problems in Air Transport Budget [Defense Industry Daily, 2006-08-18]

Publication	Defense Industry Daily
Date	2006-08-18
Web Link	www.defenseindustrydaily.com

South Africa's purchase of Airbus A400M aircraft is becoming a source of political controversy - and so are its recent expenditures to keep its existing C-130B Hercules transports flying until A400M deliveries begin in 2010-2014.

The controversy is a good illustration of some of the issues future systems and platform transitions are presenting to many militaries around the world.

Rafeek Shah, Democratic Alliance spokesperson on Defence, issued this statement recently:

"In response to my parliamentary question, Defence Minister Mosiuoa Lekota has revealed that the Air Force has spent close to R1 billion [DID: approx. USD $150 million at today's Rand-US Dollar conversion] upgrading its current fleet of 9 Hercules C-130s. This is despite the fact that it has committed up to R10 billion to purchase top of the line A400M military transport aircraft to replace this fleet.

While there may be justifiable operational reasons for this expenditure, the reality is that this expenditure is further straining an already over stretched defence budget. Just last week the Department of Defence (DoD) informed parliament that it faces a R300 million budget shortfall, largely because it has to pay for the first R215 million instalment of the A400M acquisitions.

In order to meet its financial commitments, related to the A400M, the DoD will have to shift surplus funds from other programs, including landward defence. This could have a negative effect on the operational efficiency and combat readiness of the defence force. Therefore it is clear the DoD cannot afford to have its cake and eat it.

The Airbus deal is already proving to be an enormous burden expenditure, just as the DA warned right from the beginning. I will pose further questions on the cost implications of the A400M to the minister, as well as on what other defence programme will suffer as a result."

The cycle of rising cost projections, advance investment in new systems vs. not-always-anticipated maintenance of older systems, and the effects of these issues in an era of often-tight defense budgets, is not confined to South Africa by any means.

In response to Shah's statement, South Africa's Defence Minister Mosiuoa Lekota justified the expenditure of on new Airbus A400 military transport aircraft, saying the Hercules C-130 aircraft currently in use were heading towards the end of their operational lives within the SAAF's force mix.

In April/05, Public Enterprises Minister Alec Erwin said the cost of the A400M aircraft was expected to be EUR 830 million, or R6.6 billion at today's exchange rates. South Africa has signed a contract to take delivery of 8 of the A400M military transport aircraft from 2010-2014, with a further 6 on option. Ordering those additional 6 aircraft would push the total contract value to EUR $1.5 billion, which would represent R11.9 billion at today's exchange rates.

Other orders for the A400M include Belgium (7), Chile (3), France (50), Germany (60), Luxembourg (10, Spain (27), Turkey (10), and The UK (25). The first delivery of the aircraft is currently projected for 2009.

Minister Erwin noted entering the A400M partnership meant South Africa was part of the production process, and was therefore eligible to be among the first deliveries of the aircraft. South African personnel would also be part of the technical committees involved in the manufacture of the aircraft, and the April/05 contract reportedly included provisions of a range of aircraft components from South African industry.

The South African government has said that it expects participation in the production processes to bring South African companies a total of some EUR 430 million (R3.3 billion) in revenue over the life of the program, serving as an industrial offset to the contract cost. Aerosud and Denel are considered to be the most likely corporate beneficiaries.

With respect to the C-130B Hercules fleet of 28 Squadron, Minister Lekota said the South African Air Force had spent about R870 million (USD $133.9 million at today's exchange rates) on the avionics and major servicing of the 9 airframes to comply with contemporary aviation and safety regulations. He could not give a definitive assessment of the C-130s' life expectancy, however, until a South African Air Force assessment of the condition of the outer wings was complete and the analysis from Lockheed Martin had been received and interpreted.

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