Cape Town - Troubled state-owned arms maker Denel has won an R8 billion contract from the SA National Defence Force (SANDF) to supply a new generation of light armoured vehicles to replace the outdated Ratel and Rooikat.

Public enterprises minister Alec Erwin made the announcement in parliament yesterday, during debate on his budget in the national assembly.

Shaun Liebenberg, Denel's chief executive, was excited and believed that this success justified his dramatic turnaround strategy, which involved splitting the company into 10 separate divisions and selling off non-core units.

"Importantly for Denel, a new chapter has been written. This contract puts Denel Land Systems on the road to sustainability," said Liebenberg.

He said that the new infantry combat vehicle, known as Project Hoefyster (Horseshoe), would provide Denel with the biggest contract in its 16-year history.

As the lead contractor, Denel will be responsible for the design and manufacture of the turret.

The 25-ton vehicle will be based on the Patria, a Finnish design. It will be manufactured under licence in South Africa by Oliphant Manufacturing, a subsidiary of British Aerospace.

The new vehicle will be developed over the next three years and the first of 264 vehicles is expected to roll off the production line in six or seven years.

South African companies would deliver more than 70 percent of the contract.

The contract gives a much needed boost to the state arms maker at a time when it is still licking its wounds after losing the deal to supply the Rooivalk helicopter to Turkey, and failing to get nothing but crumbs from the multibillion-rand arms procurement that is under way.

Liebenberg said the loss of the Turkey contract had in a way vindicated Denel's new posture and strategy of giving up the role of a prime contractor in global markets.

Instead, the company wanted to concentrate on securing privileged access to the local industry and get a share of the expenditure of the department of defence, he said.

Political pressure was brought on Denel to bid for the Turkish contract, but inability to use the deal as a springboard for further overseas sales and employment of expensive foreign technicians made the company price itself out of the market.

The vehicle will be manufactured in five variants each of which will need intricate turret design with several Denel business units, along with a number of other specialist suppliers, providing systems for the turrets.

With acknowledgements to Michael Hamlyn and Business Report.