Downsizing the Arms Industry in South Africa Could Harm the Economy
South Africa hosts Africa’s foremost arms and ammunition manufacturing sector. This is ironic considering the financial history of Denel, the South African arms parastatal. Denel, with the South African government as the sole shareholder, has consistently reported losses over the last decade.
Ben Coetzee, Senior Researcher, Arms Management Programme, ISS Pretoria
South Africa hosts Africa’s foremost arms and ammunition
manufacturing sector. This is ironic considering the financial history
of Denel, the South African arms parastatal. Denel, with the South
African government as the sole shareholder, has consistently reported
losses over the last decade. Lately, for example, it reported losses of
R549 million and R347 million in the 2007 and 2008 financial years
respectively.
It is the intention of the South African government to transform
Denel into a self-sustaining, profitable business, but this is yet to
happen. In order to keep the parastatal afloat, government has had to
continually subsidise Denel at the expense of the South African
taxpayer. However, Denel has been able to consistently reduce its
annual loss over recent years, and has indicated that it expects to
become profitable in 2012.
Some may argue that the South African arms industry should be
downsized and even dismantled. However, there is an indelible link
between many aspects of the arms and ammunition manufacturing sector
and the civilian economy. Many of Denel’s divisions and subsidiaries
contribute to civilian manufacturing industries and use, whether
through manufacturing of scarce components or through the development
of new technologies in various fields.
For example, Pretoria Metal Pressing (PMP), a division of Denel and
main manufacturer of ammunition in South Africa, operates a large brass
foundry and metal rolling mill. PMP produces up to 80 tons of high
quality brass strip per day. These metal sheets have various
applications from being folded to form the core of vehicle radiators to
roof cladding. PMP also manufacturers drill bits for the mining
industry, one the largest employment sectors in South Africa.
Similarly, Mechem, a subsidiary of Denel is one of the largest
demining companies in the world, and provides demining vehicles and
equipment for many United Nations operations and missions. Mechem’s
products allow for civilian economies to recover more rapidly after
periods of sustained armed conflict.
It is critical that the South African government under the
leadership of President Jacob Zuma take into account the link between
the arms and ammunition manufacturing sector in South Africa and the
civilian economy when they consider the future options for Denel.
Uninformed decisions may undermine and even harm the civilian economy.
