Opinion & Analysis

FEW were surprised when it emerged this week that embattled local arms manufacturer Denel had failed to clinch a lucrative $2bn contract to supply the Turkish army with its Rooivalk attack helicopters.

Despite the positive spin that Denel has been putting on the deal, it has long been clear that its rival, Italy’s Agusta Aerospace, had clear advantages over the South African group. Not only is AgustaWestland’s A129 Mangusta helicopter widely acknowledged to be technologically superior to the Rooivalk, but Italy had a strong political ace up its sleeve.

Turkey has long been angling to join the European Union, and Italy has been a strong supporter of such a move. The two countries also have a long relationship in arms industry co-operation.

The question, of course, is where this leaves the Rooivalk programme and, ultimately, Denel. Denel head Shaun Liebenberg put on a brave face this week, saying that the Rooivalk was a world-class helicopter and the group would continue to seek other opportunities for it. But in truth, the chances of Denel selling the Rooivalk on the world stage are slim, with countries from Spain to South Korea, Greece to China, having already failed to bite. And marketing the helicopter internationally will become ever harder as the technology becomes increasingly outdated.

Denel’s best hope of selling the Rooivalk is probably the South African Air Force, which remains the only entity that has actually ever bought any of the helicopters. If Denel, or the government, can convince the air force that it needs some more, and the air force buys them after a competitive tender process, it may extend the lifespan of the Rooivalk marginally.

But what Denel, and the government, cannot continue to do is to throw more good money after bad. The Rooivalk has already cost taxpayers billions of rands and it is abundantly clear that foreign buyers are not interested and never will be.

Denel’s financial turnaround strategy is making some important gains. Public Enterprises Minister Alec Erwin is obviously determined to keep Denel afloat and, as such, its restructuring needs to continue. But the Rooivalk will not come to Denel’s rescue. It needs to be scrapped as soon possible.

With acknowledgement to Business Day.