With state funding for troubled parastatals unlikely
any time soon, the government is also making it difficult for them to
find other ways to make ends meet.
'Partners give us international relationships. SA wants 100%, but we
can't afford it'
Arms maker Denel has for years been trying to secure
a deal with MBDA, the second-largest guided missile manufacturer in the
world. MBDA is understood to be interested in taking a 51% stake in
Denel's missiles business.
This kind of deal would be in line with a number of other successful
joint ventures Denel has entered into in recent years.
However, the government deems the missiles business strategic and
insists on owning it 100%.
Loss-making Denel received R3.5-billion of the R5.2-billion bailout it
asked for some years ago. Opportunities for it to increase borrowing to
make up the shortfall are limited. Its interest bill on debt is already
substantial.
Talib Sadik, the CEO of Denel, said that strategic partnerships worked
well.
These included Carl Zeiss Optronics, Turbomeca Africa and Rheinmetall
Denel Munition, all of which were concluded with international companies
that hold the majority stake.
"The partnerships were entered into to access stable export markets in
an environment of reduced domestic defence spend and a global market
which is largely closed, with significant consolidation having taken
place."
They have allowed the country to continue to utilise its capabilities
and have facilitated export earnings. The local businesses involved have
been modernised and recapitalised.
They have improved market access and resulted in "an immediate increase
in self-funded research and development spend", said Sadik.
"Importantly, stability of supply is created for the local defence and
security establishment."
Sadik said Denel was keen to share risks with partners, ensure money was
spent on research and development, and make use of outside expertise.
It is understood that the missiles business produces 100 missiles a
year, 20 of which are sold to the South African Defence Force.
MBDA, on the other hand, produces 3000 a year and sells internationally.
"Strategic partners give us the international relationships. SA wants
100%, but we can't afford it," Sadik said.
He added that in joint ventures where strategic partners were minority
stakeholders, they did not show the same commitment as lead partners.
He said it was difficult to rely on local sales for Denel products,
especially in view of the fact that there had been no increase in the
national budget allocation for defence spend.
"We need to find partners internationally and even locally, as the
defence force budget is flat."
While Denel was being slowly turned around, Sadik identified four
problem areas among the group's 11 entities. These were aerostructures,
missiles, the Rooivalk and the interest on debt, which is around
R150-million.
Aerostructures has been identified in the new industrial strategy, and
Sadik believed that a solution to its problems could be found within
that strategy.
With Rooivalk, Denel is in discussions with the government on various
options.
With acknowledgements to
Marcia Klein and Sunday Times.