WHITE PAPER ON

THE SOUTH AFRICAN DEFENCE RELATED INDUSTRIES

December 1999

TABLE OF CONTENTS

INTRODUCTION

MANDATE

The Department of Defence (DoD) prepared a White Paper on Defence, which was approved by Parliament in May 1996 and forms the policy framework for defence. Chapter Seven of the White Paper on Defence addressed arms control and the defence related industries, and stated that government wouldprepare a White Paper on the defence industry. The DoD began such preparations within the context of the Defence Review, which built upon the policy framework of the White Paper on Defence.

On 21 August 1996 Cabinet tasked the National Conventional Arms Control Committee (NCACC) to initiate and oversee the preparation of a White Paper on the South African defence industry. On 12 November 1996 the NCACC set out ina memorandum what the broad contents of the White Paper should be. These are reflected in the chapters in this White Paper: some of the topics put forward by the NCACC have been synthesised while others have been expanded.

AIM

The primary aim of this White Paper is to review the role, nature and current status of defence industries in South Africa, to provide government’s vision for the future of the future of these industries and to prepare policy options for the governance of the industries and for those areas critical to their continued viability. The White Paper deals with the following subjects:

• The existing policy framework for defence related industries.
• An overview of the industries including an analysis of their economic viability, as requested by the NCACC.
• Critical defence industrial capabilities and technologies which need to be sustained.
• Acquisition and technology management structures.
• Industrial policy and defence related industries.
• Governance of the industries.
• Options for the restructuring and transformation of defence related industries.

DEFINING THE DEFENCE INDUSTRY/ DEFENCE RELATED INDUSTRY

The term `defence industry’ is widely used internationally, sometimes interchangeably with `armaments industry’ and ‘defence suppliers’. However, the term ‘defence-related industries’ in some ways more accurately describes the focus of this White Paper, since there is a growing tendency for companies producing defence equipment to make use of civilian technologies, or to manufacture dual-use products which can be sold to both defence and non-defence markets. There is also an increasing overlap between defence and civilian production within companies, both nationally and internationally.

While there is no clearly defined ‘defence industry’ as a distinct industrial sector, it is evident that the production of armaments for use by national defence forces, and related activities, requires special control measures by governments and forms an identifiable cluster of activities which are recognisable globally and to which some specific economic and political processes apply.

For the purposes of this paper, South African defence-related industries are defined as those clusters of organisations in the public and private sector, and commercial companies and business units of such organisations, which are directly or indirectly active in the provision of goods and services to security forces which are defined as armaments. This provision can include research, design, development, production, assembly, test, evaluation, upgrading, procurement, export, import, maintenance, logistical support, human support or project management. The defence-related industries are mainly involved in the material, mechanical, electrical, electronic and chemical sectors of the manufacturing industry and produce armaments for both domestic and international clients.

Armaments are defined as any vessels, vehicles, aircraft, ammunition and weapons, as well as substances, materials, raw materials, components, equipment systems, articles, techniques or services, that are designed, modified or adapted to be utilised to equip, maintain or support security operations, or which are usedin the development, manufacture or maintenance of such armaments.

Throughout this White Paper the term ‘defence-related industries’ is used and not the term ‘defence industry’. This White Paper does not view the South African defence industrial capability as a distinct sector of the economy. It adopts the approach of addressing this capability as an integral part of the South African industrial base. The Green Paper identifies and addresses defence related capabilities and technologies within South Africa’s industrial base and seeks to apply a generic industrial strategy to these capabilities and technologies. A specific industrial strategy is adopted only for those key technologies and capabilities which are considered by government to be strategic for national defence.

GOVERNMENT’S VISION FOR DEFENCE RELATED INDUSTRIES

Government recognises that defence related industries are an integral part of South Africa's defence capability. Government also recognises the strategic and defence value of having a local defence industrial capability. However, due to budgetary constraints, and within the framework of broader national industrial strategy, government will be very selective of which technologies and capabilities are to be retained on the basis that they are strategic or that they constitute a national asset.

The South African Government, as a responsible member of the international community, perceives South African defence industrial capabilities as being singularly different from other components of the national industrial base for two reasons.

1. Firstly, the South African defence industrial capability has strategic importance for the national defence interest. Only certain key components have such strategic characteristics, however.
2. Secondly, the output of South Africa’s defence industrial capability, be it products, services or technologies, have to be subject to government control. The South African Government has a duty to exercise control over any product, service or technology which can be termed an armament.

METHODOLOGY

The NCACC appointed a Steering Committee to oversee the execution and management of the research and writing process for the White Paper, with representation from:

• Defence Secretariat
• Department of Trade and Industry
• Armscor
• Denel
• South African Aerospace, Maritime and Defence Industries Association (AMD)
• Human Sciences Research Council (HSRC)
• Council for Scientific and Industrial Research (CSIR)
• University of Cape Town’s Centre for Conflict Resolution
• University of the Witwatersrand’s Graduate School of Public and Development Management.

A number of position papers and research reports were generated by experts, stakeholders and interest groups. These reports were synthesised into the White Paper, which went through several drafts, in close consultation with the steering committee and the NCACC.

CHAPTER ONE

NATIONAL POLICY FRAMEWORK

THE CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA

The Constitution envisages South Africa to be a sovereign, democratic state, founded on the following values:

• Human dignity, the achievement of equality and the advancement of human rights and freedoms.
• Non-racialism and non-sexism.
• Supremacy of the Constitution and the rule of law.
• Universal adult suffrage, a national common voters roll, regular elections and a multi-party system of democratic government (Section 1(a) to (d)).

The Constitution provides for the establishment of a defence force that must be structured and managed as a disciplined force and whose primary object is to defend the people and territorial integrity of South Africa, in accordance with the Constitution and international law regulating the use of force (Section 200 (1) and (2)).

The Constitution states that all persons have the right to freedom of expression, including freedom of the press, freedom to receive or impart ideas, academic freedom and freedom of scientific research (Section 16) and that fundamental human rights may only be limited to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom (Section 36 (1) and (2)).

The Constitution requires that when organs of state contract for goods or services, they must do so in accordance with national or provincial legislation that establishes a system which is fair, equitable, transparent, competitive and cost-effective. This does not prevent the implementation of a procurement policy by organs of state providing for categories of preference in the allocation of contracts, and the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination. National legislation must prescribe a framework within which this policy may be implemented (Section 217 (1) to (3)).

The Constitution declares four governing principles which pertain to national security (Section 198 (a) to (d)):

1. National security must reflect the resolve of South Africans to live in peace and harmony, to live as equals, to be free from fear and want, and to seek a better life.
2. South Africans are precluded from participating in armed conflict, except as provided for by the Constitution and national legislation.
3. National security must be pursued in compliance with the law, including international law.
4. National Security is subject to the authority of Parliament and the national executive.

WHITE PAPER ON DEFENCE

Approach to Security

The White Paper on Defence (as approved by Parliament on 14 May 1996) sees security as an all encompassing condition in which individual citizens live in freedom, peace and safety; participate fully in the process of governance; enjoy the protection of fundamental rights; have access to resources and the basic necessities of life; and inhabit an environment which is not detrimental to their health and well-being (Chapter 2: par. 2).

The national objectives of security policy therefore encompass the consolidation of democracy; the achievement of social justice, economic development and a safe environment; and a substantial reduction in the levels of crime, violence and political instability. Stability and development are regarded as inextricably linked and mutually reinforcing (Chapter 2: par. 3).

The greatest threats to the security of the South African people are socio-economic problems such as poverty and unemployment, poor education, the lack of housing and the absence of adequate social services, as well as the high level of crime and violence (Chapter: 2 par. 5).

1. Accordingly, one of the government’s policy priorities is the Reconstruction and Development Programme. The RDP is the principal long-term means of promoting the well-being and security of citizens and, thereby, the stability of the country (Chapter 2: par. 6)
2. There is consequently a compelling need to reallocate state resource to the RDP. The challenge is to rationalise the South African National Defence Force (SANDF) and contain military spending without undermining the country’s core defence capability in the short or long-term. As a matter of sound organisational practice, any cuts to be the defence budget should be rational and well planned (Chapter 2: par. 7).

Technologically Advanced National Defence Force

The White Paper on Defence states that the SANDF shall be a balanced, modern, affordable and technologically advanced military force, capable of executing its tasks effectively and efficiently (Chapter 2: par. 11.7). It further states that the government will not endanger the lives of military personnel through the provision of inadequate or inferior weapons and equipment (Chapter 3: par. 43.6).

Core Defence Capability

The White Paper states that the SANDF has to maintain a core defence capability because of the inherent unpredictability of the future. Such a capability cannot be created from scratch should the need suddenly arise. The maintenance and development of weapons systems is a long-term endeavour (Chapter 4: par. 6.2).

The White Paper notes that deterrence requires the existence of a defence capability which is sufficiently credible to inhibit potential aggressors. Although South Africa is not confronted by any foreseeable external military threat, this capability cannot be turned on and off like a tap. It is therefore necessary to maintain a core defence capability (Chapter 5: par. 7). A core defence capability includes a balanced and sustainable nucleus with, amongst other features, the maintenance and, where necessary, the adequate and appropriate upgrading or replacement of equipment and weaponry (Chapter 5: par. 8).

The White Paper states that the services of an efficient domestic defence industry are required to address these needs (maintenance, upgrading and, where necessary, the replacement of weapons and equipment) and enable the SANDF to meet its constitutional obligations (Chapter 8: par. 3).

The industry will permit the cost-effective purchase of certain products and systems, ensure the life-cycle maintenance and support of such systems, and perform refurbishment and upgrades of existing equipment. (Chapter 8: par. 3). The defence equipment required by the SANDF, however, cannot and should not be procured exclusively from the local industry. Many complex systems cannot be produced domestically and will have to be imported. Management expertise for the specialised procurement functions is located within the DoD (Chapter 8: par. 5).

Regional Co-operation

The White Paper recognises that the government might be called upon by neighbouring countries to play a number of supportive roles. The SANDF could, for example, provide assistance as regards the maintenance and upgrading of weaponry and equipment (Chapter 4: par. 20).

Equipment for Peace Support Operations

The White Paper indicates that South Africa’s consideration of involvement in specific peace support operations will not be limited to the possible deployment of troops. The involvement could also take the form of providing equipment, logistical support, engineering services, communications systems and medical personnel facilities (Chapter 5: par. 25). The acquisition and maintenance of military equipment shall take account of the particular requirements of peace support operations (Chapter 5: par. 26).

Approval of Major Procurement Projects

The White Paper states that the approval of major weapons procurement projects is the prerogative of Parliament on an annual and long-term basis (Chapter 7: par. 5).

Budgetary Forecasts

The White Paper requires the Defence Review to present, for the consideration of Parliament and the public, detailed and well-motivated budgetary forecasts and proposals; specific policies regarding the provisioning of logistic resources; and the identification of appropriate technology to optimise the cost-effectiveness of the core force (Chapter 7: par. 6).

Foreign Procurement

It is stated that within budgetary constraints, the DoD will engage in co-operative ventures with its counterparts throughout the world in such fields as training and education, defence planning, exchange visits, combined exercises and procurement of arms and equipment (Chapter 4: par. 6.3).

Conversion of the Defence Industry

The White Paper states that in circumstances of diminishing domestic defence expenditure and falling global arms sales, the industry will be encouraged to convert production capability to civilian manufacture without losing key technology capability needed for military production (Chapter 8: par 2).

Arms Exports

The White Paper states explicitly that the defence industry must have access to international markets in order to facilitate cost-effective performance and reduce the unit costs of producing items for the SANDF (Chapter 8: par. 4). The government will support the export initiatives of the defence industry by permitting it to contract and honour obligations which have been duly approved (Chapter 8: par. 11).

Arms control

Chapter 8 of the White Paper deals specifically with arms control. On 30 August 1995, Cabinet approved new interim policy on arms control. Chapter 8 of the White Paper is based largely on that policy, as contained in the Cabinet memorandum on the ‘Rationale and Proposed Principles Governing Conventional Arms Control’ (Chapter 8: par. 1).

The White Paper establishes a number of principles and guidelines governing conventional arms trade. In essence, these require that:

• The import and export of conventional arms, and the transit of arms through South Africa, shall be subject to a control process and permit system under the auspices of a cabinet committee, the National Conventional Arms Control Committee (NCACC); and shall be subject to oversight by the relevant parliamentary committees (Chapter 8: par. 9).
• The principle of openness and transparency relating to arms trade shall apply. This will be limited only by national security interests (Chapter 8: par. 12).
• New arms control measures are based on the principles of the United Nations Charter, international law, recognised international arms control systems, and a balance of economic, ethical, political, military and security considerations (Chapter 8: par. 13).
• South Africa will promote and exercise due restraint in the transfer of conventional arms and related technologies by taking into account factors such as respect for human rights, the international security situation, and the degree to which arms sales are supportive of South Africa’s national and foreign interests. (Chapter 8: par. 15). South Africa shall not transfer arms to countries which systematically violate or suppress human rights and fundamental freedoms (Chapter 8: par. 16)
• South Africa shall avoid transfers and trade which would be likely to be used for purposes other than the legitimate defence and security needs of the recipient country (Chapter 8: par. 17).

The principles stated in the White Paper on Defence are in alignment with the NCACC Rationale and Principles which state that the government will take the following into account when evaluating arms sales:

• Be guided by respect for human rights and fundamental freedoms in the recipient country (Section 3.5.1).
• Consider cases where the political, social, cultural, religious and legal rights are seriously and systematically violated by the authorities of that country (Section 3.5.2).
• The internal and regional situation in the recipient country, in the light of existing tensions or armed conflicts (Section 3.5.3).
• The record of compliance of the recipient country with regard to international arms control agreements and treaties (Section 3.5.4);
• The nature and cost of the arms to be transferred in relation to the circumstances of the recipient country, including its legitimate security and defence needs, and the objective of the least diversion of human and economic resources for armaments (Section 3.5.5);
• The degree to which arms sales are supportive of South Africa’s national and foreign interests (Section 3.5.6).

The White Paper on Defence established certain arms control processes and structures. Conventional armaments and related technology may not be imported, transferred through South Africa, or marketed or exported abroad without a duly approved permit. The applications shall be subject to a multi-departmental review process. The NCACC will serve as the ministerial control, policy and decision-making authority. An independent Inspectorate will be established to ensure that all levels of the process are subject to scrutiny and oversight (Chapter 8: par. 18-27).

The White Paper states that South Africa is committed to the international cause of non-proliferation of weapons of mass destruction (i.e. nuclear, biological and chemical weapons and related technology, as well as advanced missile systems and missiles as defined by the Missile Technology Control Regime) (Chapter 8: par.. 28 - 38).

THE DEFENCE REVIEW

The White Paper on Defence provided for a Defence Review, the aim of which was to elaborate on the policy framework through comprehensive long-range planning on such matters as posture, doctrine, force design, force levels, logistic support, armaments, equipment, human resources and funding. More specifically, the White Paper provided that the Review would encompass the following:

• The implications of the core force for the size, doctrine, posture, weaponry, equipment and other features of the SA/NDF.
• The strategic and technical implications of the constitutional provision that the SANDF "shall be primarily defensive in the exercise or performance of its powers and functions".

The absence of any immediate military threat to South Africa, the low probability of a significant threat within the foreseeable future, the reductions in the defence budget since 1989 and the likelihood that the budget will remain restricted for some time, have created a situation where the maintenance of extensive military capabilities is neither necessary nor affordable. The Defence Review therefore defines the minimum force level that can be maintained as a growth core, in accordance with the core force approach, without the permanent loss of capabilities.

The Defence Review deals with a number of policy matters relevant to defence related industries, such as:

• Defining the defence industry (Chapter 13, paragraph 6)
• DoD requirements (Chapter 13, paragraphs 7 to 19)
• DoD policy for the defence industry (Chapter 13, paragraphs 20 to 28)
• DoD acquisition policy (Chapter 13, paragraphs 29 to 71)
• Defence technology development policy (Chapter 13, paragraphs 72 to 109)
• Social responsibility of the industry (Chapter 13, paragraphs 110 to 118)
• Arms trade (Chapter 13, paragraphs 119 to 124)

WHITE PAPER ON SCIENCE AND TECHNOLOGY

The White Paper on Science and Technology deals with defence research. It notes that although South Africa’s industries allocate considerable financial resources to research and development (R&D), the balance of trade in medium and high technologies remains negative (Section 8.2.5). A notable exception is the armaments industry, which currently has a positive annual balance of trade.

The White Paper on Science and Technology states that the essence of the new strategy of the SANDF is to convert the current force into a small, but technologically more capable one. The reliance on quality intelligence will be high to allow for the timeous scaling-up of the force to meet potential threats, as will be dependence on a broad technology base (Section 8.2.5).

Insurance against threats will take the form of maintaining small, but sophisticated forces which can be mobilised quickly and which rely on technology to increase the flexibility and responsiveness of a smaller military establishment (Section 8.2.5).

Defence Technology Base

The White Paper on Science and Technology (Section 8.2.5) notes that the maintenance of a strong technology base is a prerequisite of the new SANDF strategy and must serve a number of purposes, namely:

• Maintaining the capability to detect threats.
  • Being aware of trends in military technology and their implications for the SANDF.
  • Being capable of producing technology demonstrators that can rapidly be turned into military technology if necessary.
• Being capable of providing expert advice for procurement purposes.
• Providing test and evaluations services.
• Supporting upgrade and maintenance activities.

The White Paper on Science and Technology states that the future of the South African defence industry cannot be seen as distinct from that of its civilian manufacturing counterpart and that dual concepts should be understood and applied. The view that defence technology should be phased out in favour of civilian technology, or converted into it, is not tenable. Instead, the defence industry must make special efforts to leverage spin-offs in the civilian sector and to develop relationships with civilian institutions in the National Science Initiative (NSI) to promote spin-on’s (Section 8.2.5).

The White Paper on Science and Technology states that the Department of Defence, Department of Arts, Culture, Science & Technology and the Department of Trade and Industry should co-operate closely to develop a strategy for optimal promotion of the local defence industry (Section 8.2.5).

The Defence Research and Development Board budget should be displayed in the government science, education and technology (SET) budget, as well as in the Department of Defence budget. This would give government and the public the opportunity to evaluate the entire SET spend in an non-fragmented way (Section 8.2.5).

FOREIGN POLICY ON ARMS TRANSFERS

South Africa's destiny is inextricably linked to that of the region and the continent (Foreign Policy Framework for Southern Africa: Section 1.2). To achieve lasting peace and security, South Africa will actively promote its foreign policy principles. South Africa will, within the Southern African region, promote respect for human rights and democracy. South Africa will be guided by the principles of justice and international law (Foreign Policy Framework for Southern Africa: Section 1.2.2).

The Department of Foreign Affairs aims to develop regional policy through negotiations and mutual co-ordination. (Foreign Policy Framework for Southern Africa: Section 2.1.1).

Government will support the export initiatives of defence related industries by permitting them to contract and honour obligations which have been duly approved in terms of the national arms control system. Government shall however reserve the right to prohibit or withdraw such support should it be in conflict with or irreconcilable with international or national interest at any given time (NCACC Rationale and Principles).

SOUTH AFRICAN MACRO-ECONOMIC AND INDUSTRIAL POLICY

The Department of Trade and Industry is responsible for the general well-being of South Africa’s industrial base, its general trade and contribution to economic growth, and establishing and promoting trade relations within the international community.

From an economic point of view, the government is committed to the basic principles of fiscal and monetary discipline. Furthermore, there has been a fundamental shift in trade and industry policy from an inward orientated, import substitution approach to an outward orientated approach focusing on the achievement of international competitiveness. Government announced, in support of these basic principles, a framework for sustainable growth and development with an outward orientation - the Growth, Employment and Redistribution strategy (GEAR).

GEAR

Central to the GEAR strategy is the enhancement of non-gold exports, increased private sector investments (with a primary focus on increasing labour opportunities), development of infrastructure and improved service delivery. Key ingredients which impact specifically on defence related industries include, amongst others:

• Liberalisation of the capital account of the balance of payments and the possible abolition of exchange controls.
• The speeding up of tariff reductions to facilitate industrial restructuring.
• The improvement of incentives and facilities to promote the investment, technology development, and human resource development in industry to promote competitive and labour absorbing projects.
• The strengthening of competition policy, and the promotion of small, micro and medium enterprises.
• The promotion of sectoral industrial strategies employing cluster support programmes and related programmes and facilities.
• The restructuring of state assets (privatisation) and the introduction of schemes to allow the broader population to become owners of such assets.
• Greater support for human resource development in industry, and suitably flexible labour market policies to encourage the employment of new entrants into the labour market and marginalised groups.
• The continued rationalisation and reduction of import protection in order to encourage the emergence of truly competitive producers and service providers.

GEAR intends to lead off with the sale of non-strategic assets and the development of public-private partnerships in transport and communications. Strategic equity partnership arrangements, rather than full-scale privatisation, is envisaged for large public corporations.

The GEAR programme includes the restructuring of state assets which could include the reorganisation of assets into new companies, privatisation, strategic equity partnerships, and a suitable range of related actions.

National Industrial Policy and Related Issues

Industrial policy in South Africa is undergoing an historic change in direction. Previously, the key concern was self-sufficiency, largely for political and strategic reasons. In this context industrial policy was largely focused on demand-side incentives (e.g. tariffs, subsidies, quotas), through which firms were encouraged to produce for a highly protected domestic market.

Today the major focus of industrial policy is towards providing long-term improvements in employment and wealth creation in South Africa, through the creation of a sustainable, internationally competitive manufacturing base. In order to achieve this, industrial policy has shifted from demand-side incentives towards supply-side measures, which are designed to lower unit costs, and encourage firms to invest in products and processes that are internationally competitive.

This supply-side approach is intended to revitalise South African industry and to expedite the country's evolutionary progress up the so-called value chain towards competitiveness in more skills-intensive and technology-intensive products.

Historically, defence related industries, because of their strategic importance in the context of United Nations arms embargoes against South Africa, benefited from a high degree of direct and indirect support from government. The support that these industries received from government was determined by strategic not economic considerations.

As a result of its previous privileged access to state resources, defence related industries developed into some of the most significant parts of South Africa's industrial base. Thy also became some of the country's leading producers and exporters of high value-added and technology-intensive products. Government no longer regards defence related industries as being unique, although they will be treated differently to other industries in some respects for the following reasons:

• Government (including the Departments of Defence, Safety and Security and Correctional Services) is the main client for armaments and the only domestic one.
• The nature of many products produced defence industry (armaments) requires strict government control, particularly with respect to imports and exports.
• Some of the industries’ products and services are not subject to market forces (e.g. testing ranges).
• Many facilities and capabilities within the industries form part of the country's overall defence capability and are therefore strategically important rather than having an intrinsic economic value.
• Many people who work in defence related industries may on certain occasions be deployed outside South Africa under particularly dangerous working conditions.
• Contracting in defence related industries takes place at the highest level of the product hierarchy.

Defence related industries are an integral part of South Africa’s industrial base. National industrial policy is therefore applicable in its entirety to these industries, except in those key strategic areas where national defence priorities indicate a deviation from such policy. These exceptions are limited solely to those strategic technologies and capabilities which are crucial to the national defence interest.

National industrial policy is aimed at the promotion of industrial expansion, employment creation, exports, small business development and black empowerment and contains a number of policy directions impacting on defence related industries.

The Department of Trade and Industry (DTI) is responsible for formulating and implementing national industrial policy in South Africa. However, none of its policy initiatives are specifically directed toward defence related industries. Small, medium and micro enterprises (SMMEs) engaged in defence production, particularly those that are owned or managed by individuals from previously disadvantaged communities, should benefit significantly from many of these industrial policy initiatives.

Supply-Side Support Measures. The supply-side support measure (SSM) agenda has several elements, which contain a range of strategies and programmes. A key area of the SSM is technology promotion or innovation support.

Investment Support. Investment support is designed as an incentive fore relatively labour-intensive manufacturing industries, to support industrial growth in regions of existing or potential high agglomeration economies and to support new investments in SMME's. As described below, this support takes a number of forms.

Policy on Science and Technology

As already noted in this paper, the White Paper on Science and Technology touches on several aspects relevant to defence related industries. It indicates that the balance of trade in medium and high technologies remains negative, with the exception of the armaments industry, which highlights the importance of defence related industries in maintaining the overall technology base. It confirms the importance of a strong local technology base as an essential component of the core force concept and lists several capabilities required to support the SANDF strategy.

National Industrial Participation Programme. The mission of the programme is to leverage economic benefits and support development of South African industry by effectively utilising government procurement.

PROPOSED NATIONAL PROCUREMENT POLICY

In April 1997 the Ministry of Finance and the Ministry of Public Works issued a Green Paper on Public Sector Procurement Reform in South Africa. It seeks to enable small, medium and micro enterprises (SMME’s) easier access to the public sector tendering system. Government recognises the important role of SMME’s in the macro-economic development of the country. In the past, the tendering system favoured larger and more established businesses, and the Green Paper seeks to level the playing field.

The Green Paper proposes that the current state and provincial tender boards are abolished and that these are replaced with Procurement Centres at departmental and provincial level. It is envisaged that these are overseen at national level by a Procurement Compliance Office. In effect each Director General will be empowered to conduct all departmental procurement.

Government is the largest single purchaser of goods and services in the country, and as such government procurement must support South Africa’s overall macro-economic objectives.

The Green Paper has a number of socio-economic objectives which have significant implications for defence related industries and the manner in which the DoD conducts its procurements. The objectives include:

• Simplification of tender documents.
• Breakout procurement.
• Awarding of tenders in terms of a development objectives.
• An SMME affirmative participation programme.
• Promoting employment-intensive practices.
• Affirming marginalised sectors of society via construction projects.
• Development of an affirmative procurement policy. Such a policy has been approved by the Ministry of Defence (MoD).

When this document is adopted, the Secretary for Defence, as Head of Department in the DoD, will be empowered to conduct all DoD acquisition and procurement.

OTHER POLICIES

The following legal and policy frameworks are also relevant to the defence industry and have been taken into consideration in this White Paper:

• The Transitional Executive Council, Sub Committee on Defence, Draft National Policy for Defence Industry, dated April 1994.
• Non proliferation of Weapons of Mass Destruction Act, No 87 of 1993; Missile Technology Control Regime, Regulations Number 1789; Nuclear Suppliers Group, Number 1790.
• The Armaments Development and Production Act, No. 57 of 1968.
• The Cameron Commission recommendations.
• Cabinet Memorandum on the National Conventional Arms Control Committee (NCACC), 30 August 1995.
• Directorate of Conventional Arms Control Guide to the Terms of Reference of Conventional Arms Control in South Africa, 1 May 1996.
• Notice in Relations to Arms Control, Government Gazette No. 17324, No. R1171, 2 August 1996.
• Policy document on Industrial Participation, final draft, Department of Trade and Industry, 18 February 1997.
• The Ministry of Defence investigation into the acquisition function of the MoD, 8 August 1996, consisting of:
  • MODAC 1 (Technology and Armament Management)
  • MODAC 2 (Defence Industry Policy).
  • MODAC 3 (Defence Acquisition Programme Organisation).
  • MODAC 4 (Marketing Support Management in the Ministry of Defence).
• Policy document on Affirmative Procurement within the MoD, October 1996.
• Policy on Transparency in Armaments Exports, approved by Cabinet on 18 June 1997.
• MoD policy on Defence Industrial Participation (DIP), Revision 1, 7 May 1997.
• National Key Points legislation.
• Restructuring of State Assets, September 1995
• National Framework Agreement, April 1996
• DoD transformation documentation on restructuring and accounting officers ship responsibilities.

Contents   |   Chapter 1   |   Chapter 2   |   Chapter 3   |    Chapter 4   |   Chapter 5   |   Chapter 6   |   Chapter 7