Remarks by JEFF RADEBE, Minister of Public Enterprises, at the Denel Reception on the occasion of the African Aerospace and Defence 2000 Expo
Waterkloof Airforce Base, Pretoria, 7 September 2000
I am delighted to welcome you all to this Denel function in celebration of our participation in the African Aerospace and Defence 2000 Expo. Denel stands at the pinnacle of the South African defence-related industry establishment but we in government are also committed to ensuring the long-term growth, viability and success of the industry outside of Denel as well. In this regard, I am particularly pleased to welcome representatives from the private sector and to say that we look forward to continued coop eration, support and the maintenance of strong relations for the benefit of our country as a whole.
Excellencies, ladies and gentlemen, it goes without saying that it is a pleasure too, as I look around this hangar, to see familiar faces representing the brand names of important companies and partners from abroad. Some of you are friends of long-standin g; others have joined us more recently, and still others we look forward to establishing bonds of mutual respect and collaboration. In particular, the diplomatic and military representatives from African countries honour us by their presence, as do those from as far afield as South and North America, Asia-Pacific, and Europe.
Allow me to make just a few comments about Denel, government's vision for Denel and our defence-related industry itself, and then to conclude with an invitation.
Denel is one of the "big four" state owned enterprises that government has targeted for restructuring in terms of its business efficiencies, its participating ownership structure, its export potential and its contribution to the overall development of Sout h Africa, and by extension, Africa's economic revival in an atmosphere of peace and security. At first sight it may seem odd that we align Denel, a high-technology industry that is heavily involved in exports, alongside the utility and service entities of Eskom, Transnet and Telkom. However, Denel is a public enterprise of a very special kind, and one that occupies an important place within South Africa's general economic development over and above its relationship to the sharp end of the strategic and se curity interests of our country. Denel is an important player in the foreign policy dimension of our work and functions within a tight framework of regulation based on respect for human rights, global peace and security, and the sovereignty of nations. A glance around this hanger, and the exhibits outside, indicate clearly the depth of the reservoir of military strategic technologies, cutting edge research and development and extremely valuable human resources and skills that are part and parcel of the as set base and intellectual memory of Denel and its partners, built up over many years. Thus, and by definition, a complex mixture of openness and degrees of secrecy, defined clearly in law and subject to parliamentary oversight, must and does characterize Denel's exposure to the public.
Our objective as a government and a nation is quite simple. We have to, and we will, preserve this massive investment in high technology and ensure its application in a responsible manner that befits the highest requirements of a democratic state that par ticipates in a world marked by massive inequalities that too often erupt into conflict. To do so, the state must ensure not only the sanctity of life for its own citizens, it must ensure that those its calls upon to secure peace, its soldiers, sailors, an d airmen and women can do so with the utmost confidence in the weaponry, support systems, intelligence and deterrent instruments at their disposal. To consider anything less than this, is to commit governments everywhere to act irresponsibly and with cons cious neglect of the goals of the United Nations and whatever regional or continental organizations, such as the OAU, to which we belong. As government, and as South Africans, we will not abdicate our responsibilities in this regard.
Denel has made strong progress since the middle of the 1990s. It has taken some time to adjust to the new conditions marked by a decline in the domestic and international markets that resulted from the so-called 'peace dividend' following the end of the C old War period. During the past year or so, the reorganization of internal business practices, initial rationalization of functions and the disposal of some non-core activity, have gone hand in hand with more focused marketing and a stronger strategic foc us on its global operations, to turn the entity around. Today, I can state with confidence that Denel is on the up and up. Since 1997, group turnover has increased by 14,4%, from some R3 billion to R3,446 billion. In the same period, sales revenue from exports has increased by 107%, from R613m to R1,269 billion in 2000. Exports today account for 37% of Denel's turnover. We expect this figure to rise towards 40% by the end of the current financial year. In some divisions, the export figure is as high a s 80%. Together, these figures indicate that Denel is arguably the largest contributor to South Africa's income through the export of manufactured goods.
Our more aggressive marketing initiatives, regulated as they are, have resulted in Denel's order coverage rising to the highest it has been since the inception of Denel in 1992: 73% at the start of the 2000/2001 year. A number of system orders are at adva nced stages of negotiation at this stage and we expect significant announcements during the coming months. The benefits of participation in the defence packages will also begin to show during this year. I must add, too, that Denel's collaboration on thes e packages with other South African companies acting as contractors of various stature, will see the benefits flowing into the wider industry in South Africa. We expect that the value that will flow to Denel from the defence and industrial packages relate d to the acquisition of SAAB's Gripen, BAESystems' Hawk, and the Agusta A109, will be in the region of US$623m. This figure excludes additional value that we expect to derive from technology, infrastructure and licence transfers that are a lot more diffic ult to assess at this stage. As we finalize the contracts with South African subcontractors on these packages we trust that substantial gains will also flow to the local industry. Analysts should also note the major contribution to the economy of contracts with other South African companies in terms on both defence and industrial participation that are related to the Corvette and Submarine acquisition that are independent of Denel
Besides the packages, Denel's activities now extend to every continent in the world, covering some 52 countries at this stage. It is truly a global actor that, though small when compared to the giants of the developed world, represents an important and re liable supplier in particular niche areas. Many of our products are well known and are on display around this hangar. I am pleased to learn that great interest has already been expressed in a number of these items. In particular let me alert those who d o not yet know - and I trust there are very few of you! - to the impressive 105mm light artillery gun just outside the entrance, the 105mm Rooikat across the tarmac, the new developments to the G5 and G6 cannon, and the turret system as well. We continue to be proud of our missile developments, the various unmanned aerial vehicles in our family and the gyro-stabilised observation systems that have military and civil applications. The recently released Assegai series of projectiles and our continued excelle nce in the field of modular charges likewise impress. In center stage, as it were, the Rooivalk attack helicopter, now designed for appropriate customization to meet clients' requirements. We are about to deliver the 5th Rooivalk to the SAAF in the near future as well.
Excellencies, ladies and gentlemen. Denel has much more to offer than the items on display at this Expo. We have experience and expertise, we have skills and immensely valuable innovative engineers and research capabilities. It has trusted clients, and a clearly articulated relationship with government. The company has a healthy balance sheet without the burden of long-term borrowings at present. Its retirement funds are properly funded and it contains assets of high potential. Its most important asse ts remain its technology and its human resource base. Government has committed itself to extend the capacity of South Africa's youth to enter these areas of expertise. Denel itself contributes to this exercise as well. The social responsibilities that t he company adopts are investments in the future of the industry and not only the company itself.
This background forms the basis from which government will decide very shortly who we will invite to negotiate with Denel Aerospace, and a little down the line, with Ordnance, as Strategic Equity Partners to assist us to develop Denel further and to contri bute to our general economic development. We will also announce shortly, the particular details of the new-look Denel. But I can indicate now that we envisage a high level partner for Aerospace in a matrix that allows the best possible result not only fo r the division as a whole, but which does not limit the ability of particular interests we have within aerospace to neglected or undermined. We do not see a necessary contradiction between a high level partner and partnerships, joint programmes, or busine ss ventures across the business units of the entity. We are aware of, and in part base our assessments on, a strategic appraisal of the consolidation processes taking place within Europe and North America. We are also not averse to discussions with playe rs outside of those areas. Ultimately, the purpose of restructuring is to build and strengthen Denel in particular, and to offer further opportunities to any future partners. We are not going to dismantle the South African defence-related industries. Ou r aim and purpose, whether it affects Mechem or Eloptro, LIW or Vektor, Ariel or Datam, or of course the whole of Denel, is capacity to produce even better products than we do at present.
Let me conclude by saying that Denel has the full support of government in its endeavours. Through the Chief of the Air Force, Gen Beukes, let me express our appreciation of the tremendous support we get from the SANDF in general, and SAAF on this occasio n in particular. Although we have made major strides in developing an export capacity, we remain at the proud service of our national defence force. Denel also commits itself unequivocally to the responsibilities placed upon it as a manufacturer on the A frica continent, and we will definitely play our part in the consolidation and development of defence-related industrial capacity on our continent.
Congratulations to the women and men of Denel who have worked so hard to produce this exhibition of fine equipment. Always, it is the quiet labour of anonymous people who produce stands such as this that others tend to forget. Thank you, too, to the 12 0 00 plus employees of Denel who together make us what we are today.
Ladies and gentlemen, take advantage of this time with us to enjoy the special hospitality of Denel and our partners in South Africa and from elsewhere. For those from abroad, enjoy our African friendship and warmth, and I hope to see many of you in South Africa again, and I am sure we will meet at other occasions such as this in other parts of the world as well.
I thank you.