Publication: Cape Argus Issued: Date: 2007-03-11 Reporter: Michael Schmidt

Top-Notch Armoured Military Vehicles are Coming Straight Out of Benoni



Cape Argus




Michael Schmidt

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Tucked away behind the scrap-metal dealers and used-car lots of southern Benoni on the East Rand, behind doors opened by finger-print locks, is a hi-tech facility where armoured military vehicles are being built for US military use in Iraq and Afghanistan.

This is the main South African plant of BAE Land Systems OMC, a local subsidiary of global arms company BAE Systems, and it has just landed a $55.4 million deal to supply 90 armoured troop-carriers to the US Army and Marine Corps.

This is evidence of the growing reputation of Benoni-designed, mine-protected vehicles, a reputation cemented last year when an RG31, known as the Nyala, drove back to its base in Kandahar, Afghanistan, with its crew of four Canadian soldiers unscathed after it was rammed by a suicide bomber whose vehicle was obliterated.

Last March, 50 vehicles were delivered to Canada and another 25 ordered. The RG31 is also in service with the US armed forces in Iraq, Kuwait, Saudi Arabia, the United Arab Emirates army and Dubai police, and Italy's paramilitary Carabinieri police force.

Last week, General Dynamics Land Systems Canada announced it had won an $11m contract to produce 20 vehicles based on Benoni's "highly successful" RG31 for the US Marine Corps.

US forces had previously acquired 424 RG31s that the company, which boasted revenue of $24.1 billion last year, said had proven its mettle in protecting US and allied forces in Iraq and Afghanistan.

BAE Systems has an agreement with General Dynamics under which it markets the vehicles to North America.

The growing demand for OMC's products in North America, Europe, the Middle East and Africa has forced the Benoni plant to increase its production-line factory space by 20% over the past few months and increase its staff to 630. OMC has seen its turnover quadruple from R300m three years ago to R1.2bn last year, said company spokeswoman Natasha Pheiffer.

However it is not just the vehicles' battle-proven toughness - refined over four decades in Africa's harsh conditions - that has seen the market for South African armoured cars snowball: the purchase of Alvis OMC by BAE Systems in 2004 gave OMC the global reach of BAE Systems' marketing budget of up to $40m a year.

Most of the bolting and welding going on at OMC today is for the export market, but the company is also busy with several major upgrades of South African Army equipment. And there is also a lot of SA Army equipment at the plant undergoing routine repairs.

OMC is involved in a consortium with Denel, EADS and Patria to bid for Project Hoefyster, the SA Army's Ratel-replacement programme, Tony Savides, the company's director of international business development, told me last year.

OMC is also bidding for Project Wistula, which aims at a new fleet of "several hundred" army trucks to replace its ageing Samils, he said.

This research and development, said OMC plant manager Willem Davies, kept the company innovative and allowed it to quickly produce prototypes for clients to test.

We went to OMC this week to check out the US military equipment, and found RG31s rolling off the production line at an impressive rate of one a day in service of a $63m contract for the US Army.

On February 15, the company announced the $55.4m award for 90 RG33 armoured personnel carriers for the US Marine Corps. The company received an initial order of four vehicles for testing and they passed with flying colours.

Although the RG33s will be built in York, Pennsylvania, and not Benoni, OMC will earn royalties off each vehicle produced in the US because it owns the design copyright - a largely unrecognised way in which the South African defence industry is coining it.

The American requirements are pretty standard, said Davies: as long as the vehicles were well-built and reliable, and had interchangeable parts, they were happy.

OMC's Pheiffer said most of the profit generated by these contracts had been put back into upgrading and expanding the Benoni plant.

With acknowledgements to Michael Schmidt and Cape Argus.

*1       The South African defence industry is certainly not coining it.

Most of the South African defence industry is on its knees pleading for either direct cash baleouts as in the case of Denel, or increased local capital expenditure by the SANDF.

A point worth noting :

The BEE partner in OMC is a company called DGD Technologies.

The shareholders of DGDT are, inter alia, Moeletsi Mbeki (brother of Thabo Mbeki), Dr Diliza Mji (ex ANC Treasurer-General of kwZulu-Natal) and Seth Palatsi, (disgraced executive of the Central Energy Fund and CEO of Armscor for a week).

Dr Mji was also CEO of the Industrial Development Corporation (IDC) and while such, awarded himself a R23 million odd loan to enable him to purchase his shares in DGDT and consequently those of OMC.

OMC is also a beneficiary of the Arms Deal in that one of its subsidiaries or divisions is an entity known as Gear Ratio.

The German Frigate Consortium selected a Swiss company Maag to supply the corvettes' gear boxes in competition with a German company called Renk. Maag was selected because its product was less expensive, less risky and less noisy, the latter being a very important tactical attribute of a surface warship. However Renk had teamed with Gear Ratio and therefore both Gear Ratio and DGDT would lose out - big time. OMC and Gear Ratio were doing very badly at that time because of the downturn in the local armoured vehicle market.

But, Gear Ratio/DGDT pulled the right strings with Armscor and Chippy Shaik, the latter personally coming in to bat for Renk and Gear Ratio.

Completely contrary to oft-stated DoD and Armscor policy, the GFC's Maag selection was overturned in favour of their own selection of Renk/Gear Ratio on "strategic" and DIP grounds, despite Maag's product being lower cost and lower risk.

This is, ironically, completely opposite to the case of CCII's Information Management System (IMS) for the corvette combat suite.

The IMS had been selected by the DoD and Armscor and was conformant to specification, was lower cost and was entirely indigenous. Yet Thomson-CSF claimed it was more risky, although a later DoD/Armscor/GFC study it to be no more risky and far higher in performance and so added on a 125% price premium. So on entirely converse grounds as to the Maag/Renk case the IMS was de-selected and the non-conformant product of Thomson-CSF Detexis selected in its place at 25% higher cost (and after Thomson-CSF Detexis had had sight of CCII's IMS price).

These facts were not lost to the investigators investigating the Arms Deal, but to be sure, nothing came out in this respect in the JIT's Joint Report.

But Thabo had already appointed Thomson-CSF as the anointed one in November 1997 (confirmed in December 1998) to supply the corvette combat suite  (refer to the Arms Deal Virtual Press Office at under Organograms/corvette business) and clearly his brother was one of the anointed BEE ones when it came to carving out the future of the South African armoured vehicle business (refer to the Arms Deal Virtual Press Office at under Organograms/armoured vehicle business).