Publication: Financial Times Issued: Date: 2007-05-31 Reporter: James Boxell Reporter: Michael Peel Reporter: Alec Russell

Greed Will Drag South Africa Down

 

Publication 

Financial Times

Date

2007-05-31

Reporter

James Boxell, Michael Peel,
Alec Russell 

Web Link

www.ft.com

 

James Boxell and Michael Peel in London and Alec Russell in Pretoria

BAE Systems, Europe's biggest arms manufacturer, is poised further to bolster its global armoured vehicle business by creating a jointly owned company with Denel, the state-owned South African defence group.
 
The proposed deal, which follows the announcement of the $4.1bn (£2bn) takeover of Armor Holdings, a US armoured vehicle specialist, will also increase BAE's presence in South Africa, which it has identified as a key international market.
 
The British company is in talks with the South African government aimed at merging OMC, its local armoured vehicle manufacturing business, with Denel's artillery systems and turret-building units to create a "national champion" in armoured vehicles.
 
"Denel and BAE would partner in a subsidiary company," said Alec Erwin, South Africa's minister for public enterprises.
 
Britain's Serious Fraud Office is investigating previous BAE arms deals in South Africa but Mr Erwin said Pretoria had been given "no reason to feel adversely" about the company *1.
 
The new joint company would give BAE greater access to what Denel says is the biggest contract in its 16-year history *2, a $1.5bn order for at least 250 infantry combat vehicles by the South African army. Denel is restructuring its portfolio of businesses after years of losses.
 
BAE acquired OMC, South Africa's dominant armoured vehicle maker, two years ago when it bought United Defense Industries of the US for $4.2bn. OMC is best known for its RG31 mine-resistant vehicles, used by the US army.

Including OMC, BAE has more than 800 people working in South Africa. The company secured a deal at the end of the 1990s to sell 24 Hawk trainer jets to the South African air force and 28 Gripen fighters, made by Saab of Sweden. The deal is being looked at by the SFO.
 
BAE has become one of the world's leading arm-oured vehicle companies in the past three years, following the purchases of Alvis Vickers in the UK and UDI and with the proposed deal for Armor. The US government, in particular, is spending heavily on vehicles that offer better protection to troops, following experience of dealing with insurgents in Iraq and Afghanistan.

With acknowledgement to James Boxell, Michael Peel, Alec Russell and Financial Times.

 
*1       There should be no reason to feel adversely about one's friends and benefactors.

And every reason to feel adversely about the United Kingdom's Serious Fraud Office coming to South Africa on a fishing expedition into the conduct of one's friends and benefactors.


*2      Is this what one really wants?

The South African taxpayer is paying all R8 billion for Project Hoefyster and of course taking all of the risk.

Now Erwin and friends want to give BAE 50%?