South Africa’s Defense Industry

Remy Maduit | Authors published

The Decline of South Africa’s Defense Industry

Ron Matthews holds the Chair in Defence Economics at the Cranfield University Defence and Security Faculty, UK Defence Academy,
Shrivenham, UK.
Collin Koh is a Research Fellow at the Institute of Defence and Strategic Studies, S. Rajaratnam School of International Studies in Nanyang Technological University, Singapore.

The rise of South Africa’s defense industry is a legend. From modest beginnings, the Republic’s competitively priced, high-quality, and battle-tested weapons became a global brand. Arms exports increased in the 1980s, but this was not how it was meant to be. The 1977 UN Security Council Resolution 418, which embargoed UN member states from exporting arms to South Africa, should emasculate the South African military, weakening its ability to indiscriminately kill civilians protesting against the apartheid regime. Two principal factors worked against this outcome. First, Pretoria circumvented the worst effects of the embargo by covertly importing skills, technology, components, and machinery from abroad [i], as well as devising elaborate schemes involving front companies, smuggling networks, and deals with “pariah” states, such as Pinochet’s Chile, Saddam Hussein’s Iraq and Argentina’s Junta. [ii] Second, South Africa’s border conflicts exposed many deficiencies in the military equipment used by its armed forces, encouraging the domestic defense industry to innovate. Robust defense industrial development lasted only until the cessation of hostilities in 1989. Post-1994, a newly independent South Africa had banished apartheid and sought instead to elevate the lives of its suppressed black citizenry. In this brave new world, the goal was development within the broader national aspirations of human security, replacing the traditional emphasis on military security.

This paper analyzes South Africa’s post-independence defense contraction following Pretoria’s policy switch from defense to development. A combination of economic, social, and political factors caused the decline of defense. During Nelson Mandela’s 1990s presidency, the focus on human security was associated with heavy budgetary cuts to the armed forces and defense industry. Institutional efforts to overcome the resulting demand deficiency and arrest the decline of South Africa’s defense industry (SADI) were structured around three “sustainment” policies: 1) the “Turn of the Century” offset package linked to the controversial arms deal; 2) post-Millennium efforts to foster arms exports, and 3) the contemporary push for international defense industrial partnership. The first two of these policy approaches have been mired in controversy: an offset program that has allegations of corruption, the desperate pursuit of overseas arms sales that have led to unethical practices, and the infringement of arms control legislation has plagued. The “open sores” of these contentious events continue to fester, heightening defense industrial vulnerability. International partnerships have proved less disputatious, but the concern is whether they have acted to dismantle, rather than sustain, the ownership and manufacturing structures of SADI.

Search for military effectiveness drives innovation: 1966–89

From the formation of the Union in 1910 until its independence in 1994, South Africa has faced two principal threats. [iii] There was firstly the inherent internal danger of an uprising from its suppressed local African population. The end of WWII hostilities paved the way for the institutionalization of apartheid (racial “apartness”). They had coined white racialist domination “internal colonization”, [iv] and the Sharpeville massacre in 1960 (followed by the Soweto incident in 1976) intensified local and international anger, making internal instability palpably more real. The second threat facing South Africa was more strategic, coming from a land-based pan-African army. This external danger crystallized through the South African border conflict from 1966 onwards. Characterized as the wars of decolonization, hostilities began in Angola, where South Africa operated as the de facto colonial power, deploying its forces against the People’s Movement for the Liberation of Angola (MPLA) and People’s Armed Forces of Liberation of Angola (FAPLA). Throughout the next two decades, the South African military was engaged in both conventional and asymmetrical warfare against the South West Africa People’s Organisation (SWAPO) in Namibia, Mozambique Liberation Front (FRELIMO) in Mozambique, Zimbabwe African National Liberation Army (ZAMLA), and counterinsurgency operations in Zambia.

Set against the backdrop of the Cold War, these border conflicts morphed from independence struggles into ideological campaigns involving the USSR and its client state, Cuba. Indeed, there were reportedly up to 36,000 Cuban regular forces operating in Angola in 1976. [v] Although the Angolan and Namibian military represented a disorganized ragtag of disparate forces by comparison to the South African Defence Forces (SADF), the latter’s military equipment proved inadequate as revealed during the 1975–76 Operation Savannah in Angola. South Africa’s vintage armor and artillery were designed for a doctrine focused on internal security rather than conventional war fighting against an enemy equipped with modern Soviet-supplied heavy weapons. Not only was the SADF artillery out-ranged by Cuban/FAPLA 130 mm field howitzers and 122 mm Katyusha rockets, but its Eland armored cars were vulnerable to enemy anti-tank defenses. [vi]

These operational deficiencies, along with the 1977 UN Security Council Resolution 418 embargoing UN member states from exporting arms to South Africa and the 1984 UN Resolution 558 “requesting” all member nations to not buy South African arms, meant that an indigenous South African defense industrial solution was urgently required. [vii] Pretoria urgently set about expanding the critical defense-industrial infrastructure created in 1968 through the establishment of the Armaments Corporation of South Africa. Better known by its acronym, ARMSCOR, it was the country’s first production and procurement organization. At its peak in the 1980s, this state-owned corporation owned nine production facilities undertaking final assembly and systems integration of military platforms. Some 130,000 workers were employed both directly and indirectly in domestic arms production. [viii]

ARMSCOR and major private sector defense industrial establishments responded to the weapons technology challenge by indigenously developing and producing a broad array of innovative systems. For example, among a whole range of adapted and locally developed land systems, there was the RATEL Infantry Fighting Vehicle (IFV). On entering service in 1976 it became only the world’s third IFV. [ix] One of the RATEL’s variants, the ZT3, was armed with the Denel-developed 5,000 m range ZT3 laser-guided anti-tank missile, which proved “devastatingly effective” during the 1987–88 campaign. [x] The SADF’s R1 standard rifle had been developed from the Belgian 7,62 FN FAL gun; the R1 was itself later replaced by the R4, derived from the Israeli Galil rifle. [xi] The list of innovative land systems includes several other formidable weapon systems: the former British Centurion Main Battle Tank, upgraded via several experimental versions into the formidable 105 mm Olifant tank; the G5 155 mm howitzer, which was crash-developed to out-gun Cuban artillery, and described as the “most advanced piece of its era”; the subsequent linked development of the unique 46-ton G6 self-propelled version of the G5, the world’s first long-range (75 km) gun, integrated onto a wheeled chassis; a frequency-agile military radio, presenting another world’s first; and the Cheetah C multi-role fighter, Rooivalk attack, and Oryx medium helicopters and the Umkhonto surface-to-air missile. [xii]

These and other South African technologically advanced and battle-proven weapon systems drove exponential increases in overseas arms sales. The Republic’s weapons exports grew by a remarkable 300 percent between 1982 and 1989, with the share of arms exports in total production hitting a high of 20 percent. [xiii] Over the longer period, 1969–1984, arms sales rose from (Rand) R52mn to R1,571mn, registering an annual average real rate of growth of over 13 percent. [xiv] Two lessons can be highlighted from this era of South African defense industrial transformation. First, the UN embargoes had failed in their objective of constricting SADI’s development and production activities. [xv] second, it was the urgency of securing military effectiveness in the border war that acted as the catalyzing agent for indigenous weapons innovation.

Mandela’s transitioning of defense to security: 1990–99

The transition from a garrison-type state engaged in secretive arms procurement to another committed to democratic accountability and multi-party scrutiny began in the late 1980s. Several factors were driving the movement towards political and economic normality. First, South Africa’s de-prioritization of defense occurred when the Cold War was giving way to a benign global environment. The collapse of the Berlin wall and the implosion of the USSR had sent procurement budgets tumbling. SeSecondthe Soviet Union’s disappearance and the ending of international ideological warfare meant that super-power rivalry in Southern Africa had also abated. The Namibia and Mozambique conflicts were resolved, and the 1988 Three Powers Accord led to the removal of Cuban forces from Southern Africa. A year later, South African Armed Forces were withdrawn from the border territories, and the imperative of gaining military technology superiority dissolved. ThirThirde February 1990 release of Nelson Mandela from prison coincided with Pretoria’s de-emphasis of its hitherto militaristic foreign policy, encouraging a belated focus on South African socio-economic development. New dawn reflecting shifting priorities from external threats to internal vulnerabilities had begun.

Ferreira and Liebenberg have termed the 1990s a decade of transition. [xvi] Following apartheid’s removal, South Africa held its first all-race democratic elections. They elected Mandela as President of the new African National Congress (ANC) government, inheriting a country with a legacy of colonial exploitation, deep economic structural problems, racial oppression, high levels of militarisation, culturally embedded violence, and global isolation. [xvii] Partially because of these immense threats, South Africa represented fertile ground for pursuing a development-oriented paradigm anchored to the human security goals of the 1994 UN Developmental Report. The new government bought heavily into the principle of human security, subscribing to the assumption that they expected the role and utility of military power to decline in international politics in the post-Cold War era. [xviii] In 1994, the country’s armed forces were re-badged as the South African National Defence Forces (SANDF), with a doctrine de-emphasizing war-fighting capability and elevating non-offensive defense. [xix] In line with the conceptualization of human security, South Africa’s interpretation of security was broadened beyond the military to embrace the political, social, and economic dimensions of the new security paradigm. [xx] After 1994, a series of Government White Papers merged this policy approach, including the 1996 Defence White Paper, two Defence Reviews, and a Department of International Relations and Cooperation White Paper on South African Participation in Peace-Keeping. [xxi]

South Africa’s push for human security was associated with defense contraction. Between 1989 and 1996, defense expenditure fell by 50 percent, arms acquisition and R&D declined by 70 percent apiece, and arms production in total manufacturing output decreased from 7 to 3.2 percent. [xxii] The shift from external conflict to the quelling of internal political violence was associated with a realignment of spending that favored personnel and operating costs, rather than procurement. Postponement and cancellation of armament projects reduced the size of the defense industry, and inevitably suppliers went out of business. Those that survived suffered massive reductions in capacity. Contraction led to the loss of 55,000 defense-industrial jobs between 1989 and 1996, with the decline continuing unabated. [xxiii] This funding squeeze also affected the SANDF, suffering downsizing and rationalization, including the disbanding of military units and the contraction of bases. Redundant, obsolete, and surplus military equipment was sold or destroyed, and the country’s nuclear weapons program was terminated. The financial pressures of sustaining expensive military capability in the face of severe austerity and declining economic growth because of a domestic recession were additional causal factors in the ensuing continuous under-funding of SANDF.

Governmental efforts to downsize and restructure the defense industry in line with continued deterioration in defense spending caused significant turbulence. As a result, the SADI became increasingly concentrated, and by the mid-1990s, the government-owned Denel and the four largest private sector players accounted for over 90 percent of South Africa’s procurement spending. [xxiv] Denel dominated the local defense market, specializing in aerospace, artillery, missiles, and armored personnel carriers, accounting for close to 50 percent of sales over the period 1992–96. [xxv] Private sector companies focused on defense electronics, maritime, and support equipment.

The 1994 repeal of UN Security Council Resolution 558 banning arms exports from the Republic allowed ARMSCOR to expand its global share of arms production from 0.4 percent to 2 percent over five years. [xxvi] By 1997, nearly all South African defense firms were engaged in overseas arms sales, becoming the second biggest manufactured export, albeit accounting for just one percent of GDP and manufacturing jobs. [xxvii] Arms export success validated product competitiveness, but did little more than keep production lines warm. Fears emerged over SADI’s survival in the absence of budgetary injections to reverse the industrial decline. Yet persistent allegations of endemic corruption and regulatory avoidance undermined government efforts to raise demand and arrest the long and tortuous decline of South Africa’s once-powerful defense economy.

Corrupt and unethical practices speed up defense industrial decline: 2000–14

Entering the new millennium, they beset the ANC government with social, economic, and political problems. Dismal economic growth had not reduced the budget deficit, racial inequalities and income disparities had not narrowed and violence and corruption had metastasized throughout the public sector. There was also an emerging crisis of trust in government, with a growing unease over the credibility, competence, and contradictory nature of its policies. For example, there was the ANC’s amnesia over its pre-1994 political enthusiasm for national socialism; instead, once in power, it aggressively pushed neoliberal economic policies. [xxviii] Then, in 1999, the government did an abrupt “u-turn” on its promotion of human security by undertaking the biggest foreign arms procurement program in South African history. The arms deal was controversial at many levels, but the most fundamental criticism was the acquisition of sophisticated weapon systems, comprising warships, submarines, and advanced fighter jets, in the absence of any clearly defined actual or potential threat. [xxix] Reports suggest that they have influenced the government to procure costly and sophisticated foreign arms because their acquisition was linked to an ambitious offset package of inward investment that carried the potential to reboot the country’s declining defense industry. [xxx]

The notion of defense offset invariably elicits heated debate, but limited data thwart definitive judgments on its development impact. A major study by Erikssen on the European defense industrial base offers inconclusive evidence of whether offset exerts a positive or negative impact. [xxxi] Two edited books, one by Martin, and the other by Brauer and Dunne offer a contrasting diversity of views on the contribution of offset to local development. [xxxii] At the heart of the offset, the debate is that the two principal stakeholders possess competing objectives: the obligor pursues profit maximization, while the obligee pursues growth and development, and these two goals are invariably irreconcilable.

For some analysts, the result is that offset distorts efficient resource allocation, and is anti-competitive, trade-diverting, and welfare-reducing. [xxxiii] For instance, one of the principal modalities of defense offset is licensed production, yet this is held to add cost compared to off-the-shelf procurement. The offset premium occurs because of additional requirements, such as training and tooling-up, and they inevitably loaded the extra costs into the price of the primary defense contract. The offset premium typically averages between 5 and 10 percent of the defense contract value[xxxiv] but can reach as much as 30 percent. [xxxv] Some contend this premium or offset “over-cost” does not buy general economic development, does not buy new and sustainable work, and except for limited specific cases, does not result in appreciable technology transfer. [xxxvi]

Further, there is sparse evidence to suggest that job creation, a principal policy objective of offset, actually happens. For example, British, US, and French offset programs were expected to create 75,000 local jobs in Saudi Arabia, but in the event only sourced some 300 mostly unskilled jobs. [xxxvii] Similarly, Malaysia’s procurements involving American, British, Russian, Italian, French, and Turkish offset programs created just 100 local jobs. [xxxviii] Offset is also argued to be prone to corrupt practices. [xxxix] Yet, it is unclear how serious the problem is once the distinction is made between actual versus potential corruption. [xl]

While there is a small body of literature advocating the industrial and technological benefits of offset, most studies adopt a skeptical position, leading to suspicions that negative assessments are pre-programmed even when offset investments produce net benefits for a country. [xli] Offset-induced technology transfer may generate several benefits, such as obviating the arms purchasing state from incurring the costs of expensive R&D and providing an efficient mechanism for accessing technology compared to a straightforward purchase. [xlii] Yet, while offset may not create substantial numbers of local jobs, empirical evidence suggests that it acts to maintain existing jobs, as well as cultivate pockets of advanced industrial development, including composite production in Indonesia [xliii] and Malaysia; [xliv] it has led to the production of helicopter systems in Turkey, [xlv] and aircraft manufacturing in China. [xlvi] Overall offsets may create net economic benefits,[xlvii] including potentially beneficial impacts on exports, supply chains; and, to a lesser extent, indigenous R&D. [xlviii] Long-term partnerships are possible, though not guaranteed, outcomes. [xlix]

Defense offset: “Voodoo” economics to arrest the decline?

South Africa’s arms deal represented a remarkable volte-face from the earlier 1980s low-cost procurement strategy, and subsequent 1990s austerity (when SANDF had to cancel or postpone many of its procurement projects). The choice of highly sophisticated fighters and corvettes raised fears of corruption. [l] To sweeten the deal, and persuade a reluctant public as to its merits, they tied the acquisitions to obligatory reciprocal commitments (offsets) that would “magically” generate investment around four times the value of payments to the overseas defense contractors. The offset projects were expected directly to stimulate demand, expenditure, and jobs in the country’s ailing defense economy.

Unsurprisingly, South Africa’s pre-existing 1996 offset policy (or using the official terminology–National Industrial Participation Programme – NIPP), became a microcosm of the skepticism affecting the subject’s wider empirical analysis. NIPP’s mission was to “leverage economic benefits and support the development of South African industry…” [li] To achieve this goal, NIPP sought to cultivate international industrial partnerships to promote local development through a raft of economic mechanisms, including technology transfer, enhanced value-added content, exports to new markets, R&D collaboration, and job creation. In 1996, ARMSCOR launched and managed a new Defence Industrial Participation (DIP) program. [lii] Commercial and industrial participation investments would span diverse sectors, including automotive components, telecommunications, stainless steel, and specialty steel plants, mining equipment, gold jewelry, plastics, timber, mohair jerseys, high-quality textiles, and medical products, including prophylactics aimed at containing the spread of HIV in a country riven by AIDS. Indeed, the latter project offered an example of how the authorities viewed offset as a “force for good”. [liii]

The 1998 Defence Review approved the new arms procurement package, as well as its unusual funding method, involving budgetary rebalancing of cost-savings from military personnel reductions. [liv] A shortlist of products and identified prospective suppliers, as shown below in Table 1. The eventual arms deal, designated the Strategic Defence Procurement Package (SDPP), was worth over R29bn (US$5bn), with a planned operational span of some 30 years. [lv] The headline value of just under R30bn was not universally accepted, with counter-estimates that procurement costs would eventually escalate to R53bn once exchange rate fluctuations and the cost of the financing were taken into consideration. [lvi] The linked offset obligations borne by the suppliers involved contractual industrial participation commitments that were estimated at around R110bn, but as with the cost of the arms deal, this figure was disputed; there being concerns, it included estimated and unpredictable export sales derived from investments, as well as “hoped for” regional secondary benefits through Broad-Based Black Economic Empowerment (BBBEE) companies. [lvii] Eventually, government officials produced a more conservative R70bn offset value. [lviii] Notwithstanding these disagreements, the government maintained its position on job creation, arguing that the defense and commercial offset projects would generate over 65,000 permanent jobs. [lix]

Table 1. Major armaments acquisitions under SDPP.

Equipment	Country of Origin	Quantity	Planned Date of Delivery
MEKO A200SAN missile corvette	Germany	4	2003–05
Type-209 Mod-1400 submarine	Germany	3	2005–07
A109 light utility helicopter	Italy	30	2003–05
Hawk-100 Mark-120 lead-in fighter trainer	UK	24	2005
Super Lynx shipborne helicopter	UK	4	2005–06
Gripen-D dual-seat multi-role fighter	Sweden/UK	9	2006–08
Gripen-C single-seat multi-role fighter	Sweden/UK	19	2009–11

Source: Various sources, including government and press reports, as well as the SIPRI Arms Transfers Database.

As with disputes over the development impact of offset, disagreements persist over the benefits of South Africa’s offset package. It was once memorably described both as “voodoo economics” and a “monstrous political fraud”. [lx] Some argued the package was ill-conceived, representing an enormous waste of resources that yielded little as positive returns. [lxi] Job creation was nowhere near the government’s promised target of 65,000, with the lower range of estimates falling between 26,000[lxii] and just 12,000. [lxiii] The cost per job created through IP was estimated to be 20 times higher than the average for the local defense industry; [lxiv] the cost escalated because of Rand and interest rate fluctuations, and the payment period more than doubled from eight to 18 years. [lxv] South Africa’s experience suggests that promised economic investment and job creation effects generated through offset are chimeric. [lxvi]

There is a contrasting view that offset promoted considerable economic benefits. For example, Haines argues that offset contributed to industrial diversification, and DIP up to 2012 had generated over 220 projects, accounting for 80 percent of overall NIPP obligations. [lxvii] DIP projects acted to showcase South African defense capabilities that created longer-term opportunities, including the forging of alliances with original equipment manufacturers (OEMs). This is evidenced by a recent study that concluded DIP projects had contributed substantial “economic” benefits, including the retention of over 59,000 jobs, the promotion of like-for-like technology transfer, enhanced export opportunities for access to OEM international supply chains, and many long-term partnering arrangements, these offset programs had significantly strengthened industrial and technological sustainability. [lxviii] Indeed, a 2014 report sponsored by SADI argued that the DIP linked to the Strategic Defence Procurement Package was a lifeline that supported parts of the industry from the catastrophic funding decline that began in 1989. [lxix] In its 2015–16 Annual Report, ARMSCOR announced that just one of the eight DIPs was still active. [lxx]

The 2019 comments of a former ARMSCOR official appear to lend further qualified weight to the observation that South Africa’s offset program had contributed positive value to the local defense economy: The principal thrust of the DIP was to contribute to the sustainment of “existing” companies through work packages, export sales, technology transfer, and investment. For most beneficiaries, offset value represented a small percentage of their total business portfolio… [but]… given that SANDF contracts were never sufficient on their own to ensure viability, offset played a significant role in influencing survival during extremely tough trading conditions. Sustainability, however, was not a metric employed by either the offset authority or the obligors. No methodologies were developed to measure sustainability, especially as the beneficiaries pre-dated the obligation. [lxxi]

South Africa’s NIP and DIP policies endure. In 2019, there are a multiplicity of obligors, including Germany, the US, Switzerland, Japan, UK, France, Canada, Netherlands, Italy, Russia, Spain, Sweden, China, and Finland, with projects spanning the aerospace, defense, oil and gas, rail, marine, and bus sectors. [lxxii] Aerosud remains the flagship offset partner to many tier-one foreign defense contractors, including the capital, technology transfer, and work orders on the BAES Typhoon fighter program, engine suppressors, and armored seats for AgustaWestland military helicopters and internal assemblies for Boeing commercial aircraft. [lxxiii] Contemporary NIPP and DIP projects are argued to be far removed from stereotypical low-value metal-bashing activities. For example, MAN Ferrostaal invested in high-performance integrated circuits (for a while representing the only micro-chip manufacturing capacity in Africa); CISCO, in partnership with the local Department of Trade and Industry (DTI), invested in an ICT R&D Centre; and Huawei invested in a joint software innovation Centre. [lxxiv]

The debate over the economic positives and negatives of South Africa’s offset package is separate from a parallel controversy focused on the governance of the arms procurement deal and linked offset program. Rumors of corruption, implicating ruling ANC politicians and their associates, emerged after the 1999 arms deal announcement. [lxxv] The initial epicenter of the controversy was the use of “multiplier” credits, even though these are widely employed by other countries to reward investment in strategic sectors of the economy. Obligors benefit from multipliers by gaining offset credit values representing a multiple of the actual investment value. However, in the South African context, multipliers were criticized because the inflated offset credit values appeared to grossly exaggerate Pretoria’s estimates of actual program benefits. To rebut the criticisms, the government launched a 2001 probe that quickly adjudged the offset framework to be sound and in conformity with best practices. [lxxvi] Yet, while the probe’s findings highlighted a lack of government duplicity, it did little to stem the allegations of impropriety.

In the early 2000s, there were allegations of corruption by French and South African companies over their supply of a combat management system to the Navy. [lxxvii] Then, in July 2003, there were revelations that a local aviation company allegedly received bribes from a British supplier, [lxxviii] with “dirty” money held to have influenced negotiations over the award of the Hawk-Gripen contract. [lxxix] It also embroiled Germany in the bribery scandal, with one of its suppliers alleged to have bribed former South African defense officials over the navy’s corvette deal. [lxxx] Then, in the late 2000s, South Africa’s Parliamentary Standing Committee on Public Accounts (SCOPA) published a report calling for a full judicial inquiry to investigate SDPP graft allegations. This led to the 2011 establishment of the Arms Procurement Commission (more commonly known as the Seriti Commission of Inquiry, named after its chairperson, Judge Willie Seriti) to investigate the arms deal.

In early 2014, South Africa’s Trade and Industry Minister submitted the Strategic Defence Packages Performance Review Report to Parliament, together with a final audit report on the defense offset package. [lxxxi] The Report documented that a large sample of 40 of the 121 arms deal offset projects had been audited, leading to the discovery that several offset projects had not included obligations for job creation. “In fact, of the 40 business plans audited, only 24 included estimates of the number of jobs to be created” and that the… offset projects “only generated 26,000 direct jobs in ten years, instead of the 65,000 opportunities promised, showing that offset had created only 40 percent of the expected offset-derived target”. [lxxxii]

In the summer of 2014, the government started a study that found nothing inherently wrong with either the civil or defense offset policies or their implementation. The Report highlighted that DIP investment linked to the acquisition of front-line equipment for the Air Force and Navy under the arms deal had led to “some R15 billion being injected into South African defense companies over the decade following 1999”. [lxxxiii] By the time the Seriti Commission concluded its probe, it had cost South African taxpayers over R113mn, yet the findings published in April 2016 absolved the government, defense industry, and offshore contractors of all allegations of bribery, corruption, and fraud. [lxxxiv] The ANC government welcomed the report as a vindication of its position that it had negotiated the arms deal in an honest and contractually compliant manner.

The Seriti Commission’s findings failed to douse the flames of alleged corruption in the arms deal and linked offset program, and the debate continues unabated. Public unease reached a new nadir in August 2019 when the Pretoria High Court ruled in favor of an application to review and set aside the findings of the Seriti Commission. Civil organizations, such as Right2Know and Corruption Watch, argued that the 2016 findings, first, misled the public through the selective presentation of evidence, and, second to the exoneration of politicians involved in wrongdoing during the arms deal saga. South Africa’s former President Jacob Zuma became embroiled in the escalating scandal when, in October 2019, he was ordered to stand trial on corruption charges linked to the arms deal. The charges against Zuma have originally filed a decade previously and were set aside by the National Prosecuting Authority just before his 2009 presidential election success. [lxxxv]

Over 700 criminal charges are pending against Zuma, and form part of a broader network of state-engineered corrupt practices; [lxxxvi] the phenomenon becoming known as “state capture”. The former legal ombudsman, Thuli Madonsela, popularised the term, and refers to the wholesale takeover of public institutions by associates of Mr. Zuma, often facilitated by international firms. The estimated mass looting of public assets through state capture has cost South Africa $34bn. [lxxxvii] Amongst those allegedly capturing large parts of South Africa’s levers of power, even extending to influencing the appointment of President Zuma’s Cabinet ministers, were the Gupta brothers. [lxxxviii] In October 2019, the US Treasury Department imposed sanctions on the Gupta family, describing them as “members of a significant corruption network”. [lxxxix] The damage to South Africa’s international reputation was grave: in 1966, Transparency International rated the Republic as the least corrupt in Africa but is now assessed as more corrupt than poorer states such as Rwanda, Namibia, and Senegal. [xc] The result is that public and corporate trust has been undermined, and the global brand of South Africa’s defense industry damaged, severely hampering export prospects.

Unethical arms exports worsen reputational damage

Reputational damage matters, because since independence, South Africa’s overseas defense sales have been desperately needed to shore up the collapse in local defense spending. Although the offset program infused demand into the local defense economy, the effects were limited, translating into localized endeavors rather than a broader re-energizing of the country’s ailing defense industrial base. SADI’s malaise has thus continued uninterrupted. The government had no appetite for increased defense spending, so inevitably policy attention was re-oriented from internal to “external” sourcing of demand. Yet, efforts to foster overseas arms sales have been negatively impacted by a series of “improper” arms export deals.

The problems began during the earlier embargo era and related to export deals to combatant states involved in the Falklands and Persian Gulf Wars. [xci] There was, therefore, an urgent need to reinvent South Africa’s tainted global image, and Pretoria began this task in 1994 by seeking to persuade the international community that post-apartheid South Africa was a “responsible stakeholder”. A National Conventional Arms Control Committee (NCACC) served as a government watchdog in the approval of defense-related exports. The NCACC symbolized Pretoria’s commitment to tightening arms export controls and preventing South African weapons from winding up in the hands of governments that violate human rights, engage in civil wars, or pursue aggression against other countries.

However, in the late 1990s, there were further breaches in South Africa’s self-imposed arms export controls. These included arms sales to Rwanda that contravened a UN embargo concerning states in civil conflict. [xcii] In July 1997, the South African government sought to further tighten export controls and promote even greater levels of transparency by introducing new regulations stipulating maximum public disclosure of all arms sales and transfers to other countries. However, this did not stem the unrelenting criticism of South Africa’s arms exports. For instance, a 2000 report revealed that South African arms had been sold to Algeria, Angola, Colombia, the Republic of Congo (Brazzaville), India, Namibia, Pakistan, Rwanda, and Uganda throwing into doubt yet again the robustness of Pretoria’s arms export control regime [xciii]. There were also allegations that South Africa was selling arms to the “questionable” Libya regime, eventually confirmed by the NCACC in 2011. [xciv]

The NCACC did its best to change the culture of compliance “avoidance”. However, in 2009 the opposition party criticized South Africa’s arms export control regime, arguing that it allowed “dodgy deals” to be pursued with questionable regimes, such as Iran, Libya, and Syria. [xcv] Compounding the government’s problems, in 2012 the opposition called on the NCACC to probe allegations of a sanctions-busting deal to supply helicopter parts to Iran via a network of front companies. [xcvi]

The robustness of the NCACC arms export control regime was further questioned in October 2018, after press disclosures suggested that South African arms were fuelling Yemen’s conflict. [xcvii] In response, the government suspended arms exports to Saudi Arabia and the United Arab Emirates (UAE), the major combatants in the Yemeni conflict. With export authorizations stalled since May 2019, the suspension will seriously impact SADI. According to the 2016 and 2017 NCACC Reports, South Africa supplied heavy artillery guns, assault rifles, ammunition, armored vehicles, surveillance, and military technology to Saudi Arabia and the UAE, amounting to more than R3bn. [xcviii] In 2018, around a third (R1.5bn) of South Africa’s defense exports were shipped to these two countries, being the principal customers of more than half Rheinmetall Denel Munitions’ (RDM) exports to the Middle East. [xcix]

From defense industrial sovereignty to international engagement

Persistent revelations concerning South Africa’s infringement of national and international strategic export control regulations have emerged against the backdrop of slackening international demand for South African arms exports. Overseas demand declined dramatically by 35 percent between 200 and 2013 and 2014–18, while its share of global major arms exports flat-lined below 0.5 percent across 2009–18. [c] In 2017, arms exports reached R11bn exceeding by a wide margin SANDF’s R7bn local acquisition budget [ci] and showing the collapse in domestic spending. Relatively, South Africa is now small fry in the arms market, ranked a lowly 22nd across 2014–18, below Australia, Belarus, and Czechia. [cii] Adding to the sector’s vulnerability, its demand structure is overly concentrated on the Middle East, as the principal regional customer. A country’s arms exports normally exhibit a lower value than its defense spending, not the reverse. However, South Africa’s arms export-procurement ratio (R11bn exports against R7bn procurement) in 2017 was an atypical 1.57. The comparatively low procurement spending will erode the potential to grow “dynamic” comparative advantages and undermine the pursuit of long-run defense industrial sustainability.

Faced with continuous defense funding shortfalls and persistent questions over the probity and transparency of decision-making, Pretoria has now introduced policies to stimulate both “internal and external” demand via the 2017 defense industrial strategy. [ciii] The seeds for this revised strategic framework were sown long ago in the Government of National Unity’s Defence Review in 2003. They introduced policies to promote competition, cooperation, and affordability and explicitly acknowledged that self-sufficiency was no longer the primary criterion of defense industrial policy. Instead, the government pursued what it termed “limited self-sufficiency” in pre-determined key technology fields. Pretoria highlighted that procurement preference should be accorded to local suppliers (51 percent owned by South Africans), especially concerning identified sovereign capabilities. [civ] The goal was to seek opportunities as high up as the value-added manufacturing platform/systems chain as possible, and partnerships with foreign companies were to be encouraged. Formal abandonment of complete self-sufficiency would mean greater international defense industrial engagement, especially through international cooperation. The approach would require South African firms to position themselves as specialized contractors, or sub-suppliers to major international defense companies, not a simple task given that funding shortfalls had forced companies to reduce their defense-industrial footprint. Development and production costs were slashed, sales of local defense companies to overseas interests robustly pursued, and international technology-sharing aggressively promoted.

Denel, in particular, sought to integrate itself into the global OEM supply chains of Leonardo, Alenia Aeronautica, BAE Systems, Dassault, Gulfstream, Lockheed Martin, Rolls-Royce, Saffron, and Saab. [cv] Saab, for example, had supported Denel Aerospace (DAe) to develop ground-based air defense systems solutions in integrating the Swedish firm’s Giraffe AMD surveillance radar with Denel’s Umkhonto surface-to-air missile. [cvi] Also, Airbus Defence and Space has partnered with DAe in the production of components for the A400M military airlift program. [cvii] South Africa’s pursuit of partnerships with major foreign defense contractors has continued until the present time. For example, Paramount has recently agreed on several overseas partnerships, including working with Italy’s Leonardo Sp to develop jointly weapons and aircraft for the African market, increasing production in Kazakhstan of armored vehicles and unmanned aerial vehicles, and teaming up with Singapore’s ST Engineering to market a line of armored vehicles internationally. [cviii]

To supplement this corporate endeavor, Pretoria launched a “defense diplomacy” campaign in 2017 to engage in high-level defense cooperation. A factor in Pretoria’s favor when playing the diplomacy card is South Africa’s non-aligned status. The defense-diplomacy approach began primarily via interactions with non-Western powers. For instance, there is an incipient strategic partnership between ARMSCOR and Moscow’s state arms export corporation, Rosoboronexport, aimed at positioning South Africa as continental maintenance, repair, and overhaul hub for African militaries operating Soviet/Russian-built equipment. [cix] In parallel, there are projects directed towards combining Russian and South African systems in military weapons destined for export markets. An example of this business model is the integration of South African-produced multi-sensor warning systems in the Royal Malaysian Air Force’s Russian-built Sukhoi Su-30MKM Flanker-H multi-role fighter jets. [cx] Another Russian client state, India, has also been targeted. As part of South Africa’s so-called “Outward Selling Mission”, they will pair local defense companies with Indian enterprises possessing similar product structures to exploit development synergies in small and medium-caliber ammunition, unmanned aerial vehicles, robotics, and artificial intelligence. [cxi]

South Africa also plans to merge and expand major defense-industrial partnerships with high- and middle-income emerging states in the Middle East and African regions. A good example here is the Autumn 2018 mooted collaboration between South African and Saudi defense companies. Riyadh is the world’s third-largest defense spender, and as part of its ambitious Vision 2030 strategy, is seeking partnerships to develop its domestic defense industry to localize half its military spending by 2030. Driven by this strategy, Saudi Arabia’s Military Industries (SAMI) Corporation, the kingdom’s principal defense company, has entered discussions with major South African firms, not only to invest in the Republic but also to engage in “reverse” investment in the Kingdom, including the opening of a munitions factory in Al-Kharj. [cxii]

As evidence of Saudi Arabia’s commitment, SAMI reportedly made a $1bn bid for a broad partnership with Denel, including the acquisition of a minority stake in a joint venture with Germany’s South African company, Rheinmetall Denel Munition (RDM). [cxiii] The deal faltered because of Rheinmetall’s reluctance to dilute its 51 percent equity share in RDM; indeed, it harbors the opposite intent of raising its share to over 80 percent. [cxiv] There is also the suggestion that Rheinmetall viewed the South Africa-Saudi joint venture proposal to avoid Germany’s rigorous export laws forbidding arms sales to Saudi Arabia. [cxv] SAMI subsequently signed a collaborative defense agreement with South Africa’s Paramount Group as part of its broader partnering efforts to promote Saudi Arabian defense industrialization. [cxvi]

Losing the Saudi deal has left Denel perilously vulnerable. It remains South Africa’s biggest defense-industrial player, accounting for around 50 percent of the country’s defense output, but it is a troubled company. Employment has fallen from over 15,000 in 1992 to around only 5,000 in 2017. [cxvii] Presently drained of liquidity, it is faced with an R3bn debt on principal and interest payments. [cxviii] For the past decade, Denel has hovered between profit and loss, presently surviving only because of government financial assistance. [cxix] To make matters worse, they implicate the company in the Gupta corruption allegations.

To succeed, South Africa’s ambitious arms export initiatives will need to overcome several major challenges. In July 2013, the senior quality auditor of Rheinmetall Denel Munitions (RDM) claimed that the company was in “‘extreme chaos” due to inadequately addressing problems relating to product quality. [cxx] South Africa has also recently been criticized for losing its technological edge. In October 2017, a spokesperson for the South African defense firm, Paramount, stated that the local defense industry had effected few real technological breakthroughs in recent years and that most companies were selling 15–a 20-year-old technology. [cxxi] Development of innovative weapons technologies, the forte of ARMSCOR during the embargo era, has stalled, principally because the SANDF lacks the funds to order new equipment or to support R&D. [cxxii] Finally, the dramatic contraction of the domestic defense market has meant that exporters must somehow convince foreign clients to buy South African equipment no longer procured by SANDF.

Survival through “stabilization and sustainment”: 2015

There is now a real policy urgency in addressing the defense industry’s plight. The Defence Review 2015 warned that a funds-starved SANDF was in a “critical state of decline” and that continued “neglect” of defense capability could impact everything from border security to trade, constraining Pretoria’s continental peacekeeping and diplomatic ambitions. [cxxiii] Arms export diplomacy is a critically important step but must form part of a wider coherent defense industrial strategy. The creation of the National Defence Industrial Council (NDIC) in 2017 was aimed at formulating such a strategy to strengthen defense industrial reform. Part of its novel approach was the implementation of a “Defence Sector Charter” aimed at black economic empowerment, and a targeted 60 percent utilization of locally produced components and products. [cxxiv] In the same year, the long-awaited Defence Industry Strategy drafted on behalf of the NDIC emphasized that “a vibrant defense industry remains a crucial component of an effective South African defense capability, providing the country with a defense and security industrial base that must be positioned to ensure attainment of the Defence Review objectives and the pursuit of a Defence Strategic Trajectory”; this so-called trajectory includes the search for strategic independence, sovereign capability in selected areas, optimized equipment, and systems, and the supply of cost-effective equipment, systems and services to the defense and other security services. [cxxv]

The fear, however, is that such reforms are too little, too late. According to the Strategy document, between 1989–90 and 2016–17 acquisitions from local industry fell from R26.2bn to R7bn, R&D from R6.1bn to R850mn, turnover from R31.6bn to R19bn, and employment from 130,000 across 3,000 companies to just 15,000 from 120 companies. [cxxvi] Policymakers seeking to reverse defense industrial decline, therefore, face a herculean task. The need to overcome stifling domestic constraints on funding is acknowledged in the Strategy, but it also argues that the only practical option is to “stabilize and sustain” the defense industry (meaning, keeping those defense industry capabilities that are still viable and recovering others deemed essential). Yet, the solution is premised on the assumption that government will provide adequate funding for the defense force to cover operational employment, training, and maintenance, as well as the acquisition of equipment systems, spares, munitions, and stores, while also envisaging future government funding for R&D to secure the future of both SANDF and SADI. The primary purpose of South Africa’s defense industry, according to the Strategy, is to give the country a measure of strategic independence and freedom of strategic action, but it needs government to focus on developing… “indigenous industry to avoid subjugating South African interests to those of other states”. [cxxvii]

The Strategy posits that the intention is not to recreate the full breadth and depth of capabilities developed during the apartheid era but to… “focus on areas and sectors of defense technology and manufacturing that offer real potential to meet the government’s policy intent”. [cxxviii] This cost-effective approach is in line with the 2003 Defence Review directive aimed at limited, but not full, self-sufficiency. Yet, over a decade has passed and little has been achieved. The pressure to act has become immediate, and this was made plain in October 2017, when ARMSCOR’s CEO warned that persistent DoD cuts have left South Africa’s defense industry facing “a very bleak future”. [cxxix] A similar ominous warning was advanced in the NDIC Strategy, stating that… “failing adequate funding it will not be possible to implement the ‘stabilize and sustain’ approach, and it will be necessary to go over to a planned shutdown strategy [meaning, a carefully planned and executed retention of some core maintenance, repair, and overhaul capability]”. [cxxx]

Conclusion

This paper traces the post-1994 decline of South Africa’s defense industry after the dismantlement of the odious apartheid regime. The political thrust of the then-new ANC government was aimed at quickly restructuring and regenerating the country’s war economy, focusing instead on human security and the pursuit of a neglected development agenda that would benefit all strata of society. The resultant negative impact on the defense industry was immediate, with companies suffering a mixture of benign policy neglect and draconian cuts to defense funding.

South Africa’s policy efforts to overcome defense demand deficiency included defense offset, arms exports, and international partnership, but each of these initiatives suffered serious problems. A review of the literature suggests much ambiguity over the impact of the offset package. Similarly, in the South African context, while it is likely that offsets contributed to raised economic activity, in the short-run the costs were high, and in the long run, the package failed to act as a locomotive of “sustainable” defense industrialization, creating only pockets of development. South Africa’s arms deal was sold because it would generate four times the procurement value as new offset-related manufacturing investment in South Africa, but most of the offset projects exploited existing defense industrial capacity rather than widening and deepening capability.

In sum, South Africa’s efforts to rekindle defense demand have proved difficult. Offset beneficiaries were provided with subcontract work rather than access to frontier technologies, with the latter remaining the preserve of the offshore defense vendors. Sustainable defense export orders have similarly proved elusive, save to countries involved in conflict or violation of human rights, in contravention of South African legislation. Finally, without healthy increases in local R&D expenditure, South Africa’s defense industry will remain vulnerable to the whims of major global OEMs, especially given the intense competition to access these supply chains from other offset recipient states across the world.

The deterioration of South Africa’s defense industrial capability offers lessons to other industrializing nations seeking to promote economic, industrial, and technological development at the same time as investing huge amounts of scarce capital into building up arms manufacturing capacity. Defense industrial innovation and ensuing export success worked for South Africa during the 25-year border war, but the experience was a child of its time. Post-1994, defense investment has become increasingly difficult to justify in the absence of a strategic threat. From this perspective, the costly 1989 arms deal made no sense, save for reasons of political legitimacy, diplomatic power, and international prestige. In its aftermath, the South African government and its institutions have faced major criticism over corrupt and unethical defense practices. Investigation and judicial reviews of not just the arms deal, but also its linked offset program and contemporary arms export activities are ongoing. Yet, irrespective of the eventual outcomes, the danger is that continued uncertainty will tarnish South Africa’s broader industrial brand.

Given all these difficulties, and the continuing terminal decline of the country’s defense industry, the question has to be asked whether the high opportunity cost of defense-related investment in a country racked with economic and social inequalities is viable. At the signing of the arms deal in 1989, it was tortuously difficult for Pretoria to justify the huge diversion of capital and labor resources in the absence of any meaningful strategic threat. Three decades on, the notion that an indigenous defense industrial base is integral to South Africa’s national security is even less persuasive.

---

[i] Gavin Cawthra, ‘South Africa’, in Arms Procurement Decision Making. Vol II: Chile, Greece, Malaysia, Poland, South Africa, and Taiwan, ed. R. Singh (New York: Oxford University Press, 2000); A. Benn, ‘How South Africa’s Apartheid Regime Saved Israel’s Defense Industry’, Haaretz (10 December 2013). https://www.haaretz.com/how-apartheid-saved-israel-s-defense-industry-1.5298576 [accessed April 30, 2019].

[ii] R. Ferreira and I. Liebenberg, ‘Civil-military Relations and Arms Procurement in South Africa: 1994–2002’, Journal Society in Transition 35, no. 1 (2004): 65. https://www.tandfonline.com/doi/abs/10.1080/21528586.2004.10419107 [accessed December 21, 2019]; C. Wrigley, The South African Deal – a Case Study in the Arms Trade, CAAT (June 2003): https://www.africaportal.org/documents/974/SAIIA_Reports_No_13.pdf [accessed April 30, 2019].

[iii] Ian van der Waag, The Military History of Modern South Africa (Philadelphia, PA: Casemate publishers, 2015).

[iv] Roger Southall, ‘How ANC’s Path to Corruption was Set in South Africa’s 1994 Transition’, The Conversation (6 September 2016). https://theconversation.com/how-ancs-path-to-corruption-was-set-in-south-africas-1994-transition-64774 [accessed June 8, 2020].

[v] William M. LeoGrande, Cuba’s Policy in Africa, 1959–1980 (Berkley: Institute of International Studies,1980), 20.

[vi] Rodney Warwick, ‘Operation Savannah: A Measure of SADF Decline, Resourcefulness and Modernisation’, Scientia Militaria 40, no. 3 (2012): 354–97. See also, Bernard E. Trainor, ‘South Africa Loses a Reputation for Invincibility’, New York Times (24 August 1988).

[vii] R. Paretzky, ‘The United States Arms Embargo against South Africa: An Analysis of the Laws, Regulations, and Loopholes’, Yale Journal of International Law 12, no. 1 (1987). https://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1498&context=yjil [accessed April 30, 2019]; S. Gervasi, ‘The Breakdown of the Arms Embargo against South Africa’, Issue: Quarterly Journal of Opinion 7, no. 4 (1977): 27–34. https://www.cambridge.org/core/journals/african-issues/article/the-breakdown-of-the-arms-embargo-against-southafrica/0614AD816A19F3D4E83C23B24C813712 [accessed April 11, 2019].

[viii] Richard Bitzinger, ‘Towards a Brave New Arms Industry?’ The Adelphi Papers 43, no. 356 (2003): 45–6. https://www.tandfonline.com/doi/pdf/10.1080/714027875?needAccess=true [accessed April 23, 2019].

[ix] Helmoed Römer Heitman, ‘Equipment of the Border War’, Journal for Contemporary History 31, no. 3 (2006): 93. See also, Kyle Harmse and Simon Dunstan, South African Armour of the Border War 1975–89 (London: Bloomsbury Publishing, 2017), 33–45.

[x] Heitman, ‘Equipment of the Border War’, 94.

[xi] Id., 95.

[xii] Id., 108.

[xiii] Peter Bachelor and John Paul Dunne, The Restructuring of South Africa’s Defence Industry, unpublished paper (August 1998): 6. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.459.9848&rep=rep1&type=pdf. [accessed August 3, 2018]; Peter Bachelor and Susan Willet, Disarmament and defence industrial adjustment in South Africa (SIPRI: Oxford University Press, 1998), 43. https://www.sipri.org/sites/default/files/files/books/SIPRI98BaWi.pdf [accessed April 30, 2019].

[xiv] Republic of South Africa White Paper (Pretoria: Government of South Africa, 1984), 57.

[xv] P. Levy, ‘Sanctions on South Africa: What did they do?’ Economic Growth Center Discussion paper 796 (Yale University, 1999). http://www.econ.yale.edu/growth_pdf/cdp796.pdf [accessed April 11, 2019]; for a general piece on the effectiveness of sanctions, see A. Vines, ‘Review: The Effectiveness of UN and EU Sanctions: Lessons for the Twenty-first Century’, International Affairs 88, no. 4 (July 2012). https://onlinelibrary.wiley.com/doi/epdf/10.1111/j.1468-2346.2012.01106.x [accessed April 30, 2019].

[xvi] Ferreira and Liebenberg, ‘Civil-military Relations and Arms Procurement in South Africa’, 62. https://www.tandfonline.com/doi/abs/10.1080/21528586.2004.10419107 [accessed December 21, 2019].

[xvii] Peter Goodman, ‘End of Apartheid in South Africa? Not in Economic Terms’, New York Times (24 October 2017). https://www.nytimes.com/2017/10/24/business/south-africa-economy-apartheid.html [accessed June 8, 2020]. See also, Penelope Andrews, ‘South Africa’s Problems Lie in Political Negligence, not its Constitution’, The conversation (4 July 2017).

[xviii] Abel Esterhuyse, ‘Human Security and the Conceptualisation of South African Defence: Time for a Reappraisal’, Strategic Review for Southern Africa 38, no. 1 (2016): 33. https://www.up.ac.za/media/shared/85/Strategic%20Review/Vol%2038(1)/esterhuyse-pp-29-49.zp89600.pdf [accessed June 8, 2020].

[xix] Id., 38

[xx] Note the similarity with Japan’s notion of Comprehensive Security and Singapore’s concept of Total Defence.

[xxi] Esterhuyse, ‘Human Security and the Conceptualisation of South African Defence’, 37. https://www.up.ac.za/media/shared/85/Strategic%20Review/Vol%2038(1)/esterhuyse-pp-29-49.zp89600.pdf [accessed June 8, 2020].

[xxii] D. Abrahams, ‘Defence conversion in South Africa: A Faded Ideal?’ Institute for Strategic Studies, Occasional Paper 51, Pretoria (2001). https://oldsite.issafrica.org/uploads/paper51.pdf [accessed18 April 2019]; South African defence related industries, Republic of South Africa White Paper, Government of South Africa (1996). https://www.gov.za/documents/south-african-defence-related-industries-white-paper [accessed April 30, 2019].

[xxiii] A. Truesdell, ‘Achieving Political Objectives: South African Defense Priorities from the Apartheid to the Postapartheid Era’, African Studies Review 52, no. 3 (2009): 107–25. https://www.cambridge.org/core/journals/african-studies-review/article/achieving-political-objectives-south-african-defense-priorities-from-the-apartheid-to-the-postapartheid-era/97AACC4F02FBC55B3A577848E60FF9DA [accessed April 30, 2019].

[xxiv] 24 J. Sylvester and A. Seeger, ‘South Africa’s Strategic Arms Package: A Critical Analysis’, Journal of South African Military Studies 36, no. 1, University of Capetown (2008): 57. https://open.uct.ac.za/bitstream/item/17689/Sylvester_Article_2008.pdf?sequence=1 [accessed April 11, 2019].

[xxv] John Paul Dunne and Richard Haines, ‘Transformation or Stagnation? The South African defence industry in the early 21st century’, Journal of Defence Studies 6, no. 2 (11 December 2006): 4. https://www.tandfonline.com/doi/abs/10.1080/14702430601056113 [accessed April 11, 2019].

[xxvi] 26 A. Zacarias, ‘The South African Defence Industry and Its Dilemmas’, The South African Institute of International Affairs (1998): 13.

[xxvii] G. Shelton, ‘South African Arms Sales to North Africa and the Middle East – Promoting Peace or Fuelling the Arms Race?’ (Braamfontein, SA: Foundation for Global Dialogue. Occasional Paper No. 16, 1998): 2.

[xxviii] Ian Taylor, Stuck in Middle GEAR: South Africa’s Post-apartheid Foreign Relations (Greenwood publishing, 2001).

[xxix] ‘Gunning for Profit; South Africa’s Arms Deal’, Economist (24 November 2001) https://www.economist.com/international/2001/11/22/gunning-for-profit [accessed December 21, 2019].

[xxx] Paul Holden, The Arms Deal in Your Pocket (Johannesburg and Capetown: Jonathon Ball Publishers, 2008).

[xxxi] A. Eriksson, A Study of the Effects of Offsets on the Development of a European Defence Industry and Market, FOI and SCS. An EU-funded study. Final Report: 06-DIM-022 (12 July 2007).

[xxxii] Stephen Martin, The Economics of Offsets – Defence Procurement and Countertrade (Harwood Academic Publishers, 1996); J. Brauer and J. P. Dunne (eds), Arms Trade and Economic Development: Theory, Policy and Cases in Arms Trade Offsets (Routledge, 2004).

[xxxiii] Stephen Martin, R. White and Keith Hartley, ‘Defence and Firm Performance in the UK’, Defence and Peace Economics 7, no. 4 (1996): 127

[xxxiv] 34 Stefan Markowski and Peter Hall, ‘Mandated Defence Offsets: Can they ever Deliver?’ Defense and Security Analysis 30, no. 2 (2014). https://www.tandfonline.com/doi/abs/10.1080/14751798.2014.894294 [accessed December 21, 2019]

[xxxv] Willy Struys, ‘Offsets and Weapons Procurement: The Belgian experience’, in The Economics of Offsets: Defence Procurement and Countertrade, ed. Stephen Martin (Routledge, 1996), 86.

[xxxvi] Brauer and Dunne (eds), Arms Trade and Economic Development

[xxxvii] Ron Matthews, ‘Saudi Arabia’s Defence Offset Programmes: Progress, Policy and Performance’, Journal of Defence and Peace Economics 7, no. 3 (1996): 235–48.

[xxxviii] Kogila Balakrishnan and Ron Matthews, ‘The Role of Offsets in Malaysian Defence Industrialization’, Defence and Peace Economics 20, no. 4 (2009): 351.

[xxxix] ‘Defence Offsets: Addressing the Risks of Corruption and Raising Transparency’, Transparency International (London, UK, 2010), 1–54; Peter Platzgummer, ‘Arms Trade Offsets and Cases of Corruption: Usage of Anti-corruption Tools in Special Forms of Arms’, International Public Management Review 14, no. 2 (2013): 17–38. http://journals.sfu.ca/ipmr/index.php/ipmr/article/view/131 [accessed December 21, 2019].

[xl] Ron Matthews and Irfan Ansari, ‘Economic Orthodoxy v Market Pragmatism: A Case Study of Europe’s ‘Abandonment’ of Defense Offset’, Journal of Public Finance and Management 15, no. 4 (December 2015): 383.

[xli] Travis Taylor, ‘Countertrade Offset in International Procurement: Theory and Evidence’, in Designing Public Procurement Policy in Developing Countries: How to Foster Technology Transfer and Industrialization in the Global Economy, eds. A. Yulek and Travis Taylor (New York: Springer, 2012), 17

[xlii] B. Udis and K. Maskus, ‘Offsets as Industrial Policy: Lessons from Aerospace’, Journal of defence Economics 2, no. 2 (1991).

[xliii] ‘Manufacturing in Indonesia: On a Wing and a Prayer’, Economist (2014). http://www.economist.com/news/business/21596589-state-aerospace-firmrisks-forgetting-lessons-asian-crisis-wing-and-prayer [accessed June 22, 2015]. Nellie Yan Zhang, China’s Search for Indigenous Industrial Development: A Case Study of the Aviation Industry. Doctoral thesis, Cranfield university at the UK Defence Academy (2009): 119–26.

[xliv] Balakrishnan and Matthews, ‘The Role of Offsets in Malaysian Defence Industrialization’, 349.

[xlv] Matthews and Ansari, ‘Economic Orthodoxy v Market Pragmatism’, 386.

[xlvi] C. Wessner and A. Wolff, Policy Issues in Aerospace Offsets: Report of a Workshop (Washington DC: National Academy Press, 1997), 22–6; Brauer and Dunne (eds), Arms Trade and Economic Development, 97.

[xlvii] ‘Special Report: Dutch Audit (issue 3)’. CTO Data Service Co., Countertrade and Offset, London (2003); ‘Seriti Commission finds nothing wrong in Arms Deal’, Defence Web (21 April 2016). https://www.defenceweb.co.za/sa-defence/sa-defence-sa-defence/seriti-commission-finds-nothing-wrong-in-arms-deal/ [accessed April 11, 2019].

[xlviii] Ron Matthews, ‘The UK Offset Model: From Participation to Engagement’, RUSI Whitehall Paper 1–14 (2014): 1–98.

[xlix] Ron Matthews, ‘The Rise and Demise of Government-mandated Offset Policy’, in The Political Economy of Defence (Cambridge University Press, 2019), 148.

[l] A. Feinstein, P. Holden and B. Pace, ‘Corruption and the Arms Trade: Sins of Commission’, in SIPRI Yearbook 2011: Armaments, Disarmament and International Security (2011), 21–5. https://www.sipri.org/yearbook/2011/01 [accessed December 21, 2019].

[li] E. Traebert Cavalini and D. J. Fourie, ‘Offset Agreements in the Defence Arena’, African Journal of Public Affairs 6, no. 3 September (2013): 20. https://repository.up.ac.za/bitstream/handle/2263/41038/TraebertCavalini_Offset_2013.pdf?sequence=1&isAllowed=y [accessed April 30, 2019].

[lii] C. Wrigley, The South African Deal – A Case Study in the Arms Trade, CAAT (June 2003): 3 https://www.africaportal.org/documents/974/SAIIA_Reports_No_13.pdf [accessed April 30, 2019].

[liii] Interview with an anonymous advisor to the South African government, who served during the negotiation and implementation of the offset arrangements, London (20 July 2018).

[liv] South Africa Defence Review, Government of South Africa (1998). https://www.gov.za/documents/south-african-defence-review-1998 [accessed April 30, 2019].

[lv] M. Sehlapelo, ‘The South African strategic defence procurement package and economic growth’, African Security Review 11, no. 4 (2002). https://www.academia.edu/7591258/THE_SOUTH_AFRICAN_STRATEGIC_DEFENCE_PROCUREMENT_PACKAGE_AND_ECONOMIC_GROWTH [accessed April 30, 2019]

[lvi] C. Wrigley, ‘The South African deal – a case study in the arms trade’, CAAT (June 2003): 12. https://www.africaportal.org/documents/974/SAIIA_Reports_No_13.pdf [accessed April 30, 2019].

[lvii] Wrigley, ‘The South African Deal – A Case Study in the Arms Trade’, 11.

[lviii] Feinstein, Holden and Pace, ‘Corruption and the Arms Trade’, 26.

[lix] Economic offsets estimation in recent Defence Procurement Programme, Parliamentary Monitoring Group (PMG), Hearings (5 February 2001). https://pmg.org.za/committee-meeting/186/ [accessed December 23, 2019].

[lx] ‘Heated exchange as MPs query report on arms deal offsets’, Cape Times (9 February 2012). https://www.pressreader.com/south-africa/cape-times/20120209/282449935926677 [accessed April 25, 2019].

[lxi] ‘Gunning for Profit: South Africa’s Arms Deal’, Economist (24 November 2001). https://www.economist.com/international/2001/11/22/gunning-for-profit [accessed December 21, 2019]; John Paul Dunne and G. Lamb, Defence Industrial Participation: The South African Experience (2003). http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.462.2615&rep=rep1&type=pdf [accessed April 11, 2019]; P. Holden and H. Van Vuuren, The Devil in the Detail: How the Arms Deal Changed Everything (Jonathan Ball Publishers, 2011).

[lxii] Richard Haines, ‘The Complexities of Development: The South African National Industrial Participation Programme in Perspective’, in Designing Public Procurement Policy in Developing Countries, eds. M. Yulek and T. Taylor (New York: Springer, 2012). https://link.springer.com/chapter/10.1007/978-1-4614-1442-1_6 [accessed December 21, 2019].

[lxiii] Wrigley, ‘The South African deal – A Case Study in the Arms Trade’, 13.

[lxiv] L-A. Alfreds, Belief in offsets was naïve, Corruption Watch (14 March 2014). https://www.corruptionwatch.org.za/belief-in-offsets-was-naive/ [accessed December 21, 2019]; Dunne and Lamb, Defence Industrial Participation: The South African Experience; P. Batchelor and John Paul Dunne, ‘Industrial Participation, Investment and Growth: The Case of South Africa’s defense-related industry’ (1999). http://www.tips.org.za/files/306.pdf. [accessed April 30, 2019].

[lxv] Ferreira and Liebenberg, ‘Civil-military Relations and Arms Procurement in South Africa’, 65. https://www.tandfonline.com/doi/abs/10.1080/21528586.2004.10419107 [accessed December 21, 2019].

[lxvi] Holden and Van Vuuren, The Devil in the Detail.

[lxvii] ‘Offset programme reviewed’, Defence web (13 February 2012). https://www.defenceweb.co.za/industry/industry-industry/offset-programme-reviewed/ [accessed December 21, 2019].

[lxviii] J. Van Dyk, Richard Haines and G. Wood, ‘Development in Adversity: South Africa’s Defence Industrial Participation in Perspective’, South African Journal of Military Studies 44, no. 2 (2016): 150–4. https://scientiamilitaria.journals.ac.za/pub/article/view/1179 [accessed December 21, 2019].

[lxix] ‘Defence offsets can be business multipliers’, Defence Web (11 August 2014). https://www.defenceweb.co.za/industry/industry-industry/defence-offsets-can-be-business-multipliers/ [accessed April 11, 2019].

[lxx] An Analysis of the Armaments Corporation of South Africa’s (ARMSCOR) Annual Report for the Financial Year 2015/16, Armscor Research Unit (October 2016). http://pmg-assets.s3-website-eu-west-1.amazonaws.com/161011Armscor_summary.pdf [accessed December 23, 2019].

[lxxi] E-mail correspondence with an anonymous former senior ARMSCOR executive involved in early offset programme implementation (3 November 2019)

[lxxii] E. Malapane, Developments in RSA in industrial partnerships for both defense and non defense sectors (Virginia, USA: GOCA presentation, 2019).

[lxxiii] E-mail correspondence with an anonymous former senior ARMSCOR executive involved in early offset programme implementation (3 November 2019).

[lxxiv] Haines, ‘The Complexities of Development’.

[lxxv] Holden, The Arms Deal in Your Pocket.

[lxxvi] Strategic Defence Packages – Joint Report (14 November, 2001). https://www.gov.za/sites/default/files/gcis_document/201409/jointinvestigationreport0.pdf [accessed April 30, 2019].

[lxxvii] Commission of Enquiry into Allegations of Fraud, Corruption, Impropriety or Irregularity in the Strategic Defence Procurement Package, Vol 2, Arms Procurement Commission (December 2015). https://www.thedti.gov.za/news2016/APCreport_vol2.pdf [accessed December 23, 2019].

[lxxviii] R. Evans and D. Leigh, ‘BAE “Paid Millions” to win Hawk Jets Contract’, The Guardian (30 June 2003). https://www.theguardian.com/uk/2003/jun/30/politics.southafrica [accessed April 11, 2019].

[lxxix] S. Sole and N. Dawes, ‘BAE’s Web of Influence in South Africa’, Mail & Guardian Online (12 January 2007). https://mg.co.za/article/2007-01-12-baes-web-of-influence-in-south-africa [accessed April 11, 2019].

[lxxx] M. Monare, ‘Stonewalling by Justice Dept Hobbling Frigate-bribes Probe’, Security.co.za. (5 February 2009). https://www.security.co.za/news/11473 [accessed April 25, 2019].

[lxxxi] K. Helfrich, ‘Internal Audit Report Reveals Failures in Arms Deal Offsets’, Defence Web (14 February 2014). https://www.defenceweb.co.za/sa-defence/sa-defence-sa-defence/internal-audit-report-reveals-failures-in-arms-deal-offsets/ [accessed April 11, 2019].

[lxxxii] Helfrich, ‘Internal Audit Report Reveals Failures in Arms Deal Offsets’.

[lxxxiii] ‘Defence Offsets can be Business Multipliers’, Defence Web (11 August 2014). https://www.defenceweb.co.za/industry/industry-industry/defence-offsets-can-be-business-multipliers/ [accessed April 11, 2019].

[lxxxiv] ‘Seriti Commission Finds Nothing Wrong in Arms Deal’, Defence Web (21 April 2016). https://www.defenceweb.co.za/sa-defence/sa-defence-sa-defence/seriti-commission-finds-nothing-wrong-in-arms-deal/ [accessed April 11, 2019].

[lxxxv] J. Burke, ‘Zuma to Stand Trial on Corruption Charges Relating to $2.5bn Arms Deal’, The Guardian (11 October 2019). https://www.theguardian.com/world/2019/oct/11/zuma-to-stand-trial-corruption-charges-arms-deal-south-african-president [accessed December 21, 2019].

[lxxxvi] ‘A Decade of “State Capture” has Damaged South Africa’s Institutions’, Economist (25 April 2019). https://www.economist.com/special-report/2019/04/25/a-decade-of-state-capture-has-damaged-south-africas-institutions [accessed December 21, 2019].

[lxxxvii] J. Flanangan, ‘Boost for Ramaphosa’s Anti-bribery Drive’, The Times (22 November 2019)

[lxxxviii] M. Magome, ‘US Sanctions Family Accused of Rampant Graft in South Africa’, Associated Press (10 October 2019). https://apnews.com/26fec6aee4eb421383ff3f748a3eb371 [accessed December 21, 2019].

[lxxxix] Magome, ‘US Sanctions Family Accused of Rampant Graft in South Africa’.

[xc] ‘A Decade of “State Capture” has Damaged South Africa’s Institutions’

[xci] J. Lelyveld, ‘South Africa Denies Selling Arms to Argentina’, New York Times (25 May 1982). https://www.nytimes.com/1982/05/25/world/south-africa-denies-supplying-arms-to-argentina.html [accessed April 11, 2019].

[xcii] ‘South Africa: Question of Principle: Arms Trade and Human Rights’, UNHCR, Human Rights Watch (2000). https://www.refworld.org/docid/3ae6a8734.html [accessed April 11, 2019].

[xciii] ‘South Africa: Question of Principle: Arms Trade and Human Rights’.

[xciv] ‘SA did Sell Arms to Libya: NCACC’, Defence Web (28 February 2011). https://www.defenceweb.co.za/joint/diplomacy-a-peace/sa-did-sell-arms-to-libya-ncacc/ [accessed December 23, 2019].

[xcv] P. Wezeman, ‘South African Arms Supplies to Sub-Saharan Africa’, SIPRI Background Paper 11 (2011). https://www.sipri.org/publications/2011/sipri-background-papers/south-african-arms-supplies-sub-saharan-africa [accessed December 21, 2019].

[xcvi] ‘NCACC Must Investigate and Stop the Sanctions-Busting Helicopter Parts Deal with Iran’, All Africa (14 March 2012). https://allafrica.com/stories/201203140463.html [accessed December 23, 2019].

[xcvii] S. Ebrahim, ‘South African Weapons of War are Fuelling Yemen’s conflict’, IOL (12 October 2018). https://www.iol.co.za/news/opinion/south-african-weapons-of-war-are-fuelling-yemens-conflict-17456971 [accessed December 21, 2019].

[xcviii] Ebrahim, ‘South African Weapons of War are Fuelling Yemen’s conflict’.

[xcix] J. Bavier and A.Winning, ‘South African defence firm RDM’s Turnover Hurt by Export Headaches – CEO’, Reuters (4 September 2019). https://www.reuters.com/article/safrica-rheinmetall/south-african-defence-firm-rdms-turnover-hurt-by-export-headaches-ceo-idUSL5N25U4HI [accessed December 21, 2019].

[c] P. Wezeman, Aude Fleurant, Alexandra Kuimova, Nan Tian and Siemon T. Wezeman, ‘Trends in International Arms Transfers’, SIPRI 2018 (March 2019). Table 1. https://www.sipri.org/publications/2019/sipri-fact-sheets/trends-international-arms-transfers-2018 [accessed December 27, 2019].

[ci] M. Zondi, ‘SA’s Flagging Industry needs Ammunition to Remain a Force’, IOL (1 August 2019). https://www.iol.co.za/news/opinion/sas-flagging-defence-industry-needs-ammunition-to-remain-a-force-30162082 [accessed December 21, 2019].

[cii] Wezeman, Aude Fleurant, Alexandra Kuimova, Nan Tian and Siemon T. Wezeman, ‘Trends in International Arms Transfers’.

[ciii] Defence Industry Strategy (Draft). Version 5.8, National Defence Industry Council, Republic of South Africa (May 2017). http://www.dod.mil.za/advert/ndic/doc/Defence%20Industry%20Strategy%20Draft_v5.8_Internet.pdf [accessed August 5, 2018].

[civ] D. Botha, ‘South Africa’s Defence Industry: Charting a New Course?’ Institute for strategic studies paper 78 (September 2003): 4. https://issafrica.s3.amazonaws.com/site/uploads/PAPER78.PDF [accessed August 3, 2018].

[cv] K. Campbell, ‘South African Defence Industry Moves to Collaborate at Home and Abroad to Thrive’, Engineering News (20 October 2014). http://www.engineeringnews.co.za/article/south-african-defence-industry-moves-to-collaborate-at-home-and-abroad-to-thrive-2014-10-24 [accessed April 10, 2019].

[cvi] G. Martin, ‘Saab and Denel Collaborating on Air Defence with Giraffe Radar, Umkhonto Missile’, Defence Web (12 September 2016). https://www.defenceweb.co.za/land/land-land/saab-and-denel-collaborating-on-air-defence-with-giraffe-radar-umkhonto-missile/?catid=74&Itemid=30 [accessed April 11, 2019].

[cvii] K. Campbell, ‘South Africa’s Defence Industry Faces Serious Challenges but also Sees Future Opportunities’, Engineering News (14 July 2017). http://www.engineeringnews.co.za/article/south-africas-defence-industry-faces-serious-challenges-but-also-sees-future-opportunities-2017-07-14-1 [accessed April 23, 2019].

[cviii] J. Bavier, ‘Crisis Demands Revamped South Africa Defence Sector – Paramount Chairman’, Reuters News (22 September 2018). https://af.reuters.com/article/worldNews/idAFKCN1M12GE [accessed December 21, 2019]

[cix] G. Hosken, ‘SA, Russia Get Down to War Basics at Defence Expo’, The Times (15 September 2016). https://www.timeslive.co.za/news/south-africa/2016-09-15-sa-russia-get-down-to-war-basics-at-defence-expo/ [accessed April 11, 2019].

[cx] ‘Irkut Corporation Finalizes Su-30MKM Delivery to RMAF’ (August 12, 2009). http://eng.irkut.com/press-centre/news/2078/ [accessed August 5, 2018].

[cxi] B. Stevenson, ‘South African and Indian Defence Industries Identify Areas for Collaboration’, Jane’s Defence Industry (22 July 2019). https://www.janes.com/article/89994/south-african-and-indian-defence-industries-identify-areas-for-collaboration [accessed December 21, 2019].

[cxii] ‘Saudi Arabia Opens Munitions Factory Built by Rheinmetall Denel Munition’, Defence Web (4 April 2016). https://www.defenceweb.co.za/industry/industry-industry/saudi-arabia-opens-munitions-factory-built-by-rheinmetall-denel-munition/ [accessed April 11, 2019].

[cxiii] J. Bavier and A. Winning, ‘Exclusive: Saudi Arabia makes $1 Billion Bid for Partnership with South Africa DEFENCE GROUP DENEL’, Reuters News, (8 November 2018). https://uk.reuters.com/article/us-saudi-safrica-arms-exclusive/exclusive-saudi-makes-1-billion-bid-for-partnership-with-south-africa-defense-group-denel-idUKKCN1ND14Q [accessed April 23, 2019]. [accessed April 23, 2019].

[cxiv] Bavier and Winning, ‘South African Defence Firm RDM’s Turnover Hurt by Export Headaches – CEO’.

[cxv] C. Alessi, ‘German Gunmaker Looks to South African Arms Exports’, Wall Street Journal (26 December 2014). https://www.wsj.com/articles/german-gunmaker-looks-to-south-african-exports-1419625641 [accessed December 21, 2019]; J. P. Dunne, G. Lamb and E. Nikolaidou, ‘South Africa and its defence industry’, in The Economics of the Global Defence Industry, eds. Keith Hartley and Jean Belin (Routledge, 2019), 568, fn. 16.

[cxvi] Saudi state defense firm pens deal with South Africa’s Paramount’, Reuters (3 July 2019). https://af.reuters.com/article/africaTech/idAFKCN1TZ0MV-OZABS [accessed December 21, 2019].

[cxvii] Dunne, Lamb and Nikolaidou, ‘South Africa and Its Defence Industry’, 556.

[cxviii] ‘Denel runs out of cash as debt payments loom’, Bloomberg, Businesstech (25 June 2019). https://businesstech.co.za/news/business/325375/denel-runs-out-of-cash-as-debt-payments-loom/ [accessed November 25, 2019].

[cxix] Dunne, Lamb and Nikolaidou, ‘South Africa and its Defence Industry’, 565.

[cxx] ‘Chaos at division of Denel, official tells Labour Court’, Sunday Independent (7 July 2013) https://www.pressreader.com/south-africa/the-sunday-independent/20130707/281547993482141 [accessed April 11, 2019].

[cxxi] G. Martin, ‘South Africa Defence Industry Facing Tough Times, needs to Work Together’, Defence Web (12 October 2017). https://www.defenceweb.co.za/industry/industry-industry/south-african-defence-industry-facing-tough-times-needs-to-work-together/ [accessed April 11, 2019].

[cxxii] H. R. Heitman, ‘Feature: South Africa’s Defence Priorities’, Defence Web (28 June 2017). https://www.defenceweb.co.za/joint/military-art-a-science/feature-south-africas-defence-priorities/ [accessed April 11, 2019].

[cxxiii] W. Roelf, ‘Exclusive: South African Military in ‘Critical Decline’, Review Says’, Reuters News (25 March 2014). https://www.reuters.com/article/us-safrica-defence-exclusive-idUSBREA2O10U20140325 [accessed April 23, 2019].

[cxxiv] N. Mapisa-Nqakula, ‘Defence Charter will bring Change to the Industry’, Defence Web (22 May 2017). https://www.defenceweb.co.za/industry/industry-industry/defence-charter-will-bring-change-to-the-industry-mapisa-nqakula/ [accessed April 11, 2019].

[cxxv] Defence Industry Strategy (Draft). Version 5.8, National Defence Industry Council Republic of South Africa (May 2017). http://www.dod.mil.za/advert/ndic/doc/Defence%20Industry%20Strategy%20Draft_v5.8_Internet.pdf [accessed August 5, 2018].

[cxxvi] Campbell, ‘South Africa’s Defence Industry Faces Serious Challenges but also sees Future Opportunities’.

[cxxvii] Defence Industry Strategy (Draft). Version 5.8.

[cxxviii] Ibid.

[cxxix] G. Martin, ‘South African Defence needs to be Prioritized’, Defence Web (13 October 2017). https://www.defenceweb.co.za/industry/industry-industry/south-african-defence-needs-to-be-prioritised/ [accessed April 11, 2019].

[cxxx] Defense Industry Strategy (Draft). Version 5.8

.