Government urged to prioritise defence sector

September 29, 2017

 

Armscor CEO Kevin Wakeford has called on the South African government to prioritise the defence sector, particularly regarding the budget, to ensure it is sustainable and can drive transformation and innovation in the future.

Speaking at the 4th Aerospace, Maritime and Defence Conference held at the Council for Scientific and Industrial research (CSIR) in Pretoria, Wakeford says there seems to be a disconnect between what Parliament had approved in the Defence Review and funding.

The review is not just a document involving policy but also deals with its implementation requirements together with milestones.  However, he said there is not a cent available for its implementation. 

He indicated part of the blame lies with the defence sector as there is a disconnect in the national psyche between the importance of defence on the one hand and what its resourcing requirements are. 

He stressed that the defence sector must be prioritised as it is pivotal to peace and stability, the country’s sovereign integrity, industrial innovation and ultimately to the prosperity of the continent.

Wakeford pointed out that about 25 years ago, defence was 11% of GDP while today it is hovering around 1%.

Most South African defence companies are relying on the export market to survive, however, in successful industrial economies the main clients are domestic, while the secondary clients are foreign.   

Denel’s 2016/2017 financial results presented in August showed its order book had dropped from more than R30 billion over a year ago to R18 billion.  

The arms manufacturer needs to export to survive, with 63% of its earnings from exports in 2016/17.  Internationally, defence companies typically export 14% of their production.

Defence Secretary Sam Gulube also noted that challenges within the economy had resulted in cuts to departmental budgets – with the Department of Defence being one of the most affected.  
He pointed out as the budget has been cut by about five billion rand over the next three years because of pressing social needs like education, the department was now relying on the defence industry to convince government that by supporting the industry it would be making a major contribution to the country’s economic growth.   

He also pointed out that defence industry products and services are not just for the Department of Defence but are for the wider security of the country and growing its economy.

Following the February budget, the Estimates of National Expenditure (ENE) show the Department of Defence and the SANDF received R48 618 million for the 2017/18 financial year.

 

Photo Armscor CEO Kevin Wakeford pointed out that about 25 years ago, defence was 11% of GDP while today it is hovering around 1%.(Janet Szabo)This is an increase of just under R1.5 billion on the 2016/17 budget.

Finance Minister Malusi Gigaba will present his Medium Term Budget Policy Statement in Parliament on 25 October.

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