Billions of rands worth of SA defence exports on hold

(000228.79-:E-000157.73:N-:R-SU:C-30:V)   

Defence exports worth R2.85 billion are currently on hold to Saudi Arabia, the United Arab Emirates, Turkey, and Poland, the National Conventional Arms Control Committee (NCACC) has revealed, as the South African defence industry continues to struggle to export its products to certain countries.

Ezra Jele, Head of Secretariat of the National Conventional Arms Control Committee, made this known on 24 November when he briefed the Joint Standing Committee on Defence (JSCD) on the NCACC’s third quarter report.

Jele said that between July and September 2022, a total of 152 munitions export permits were authorised to 41 countries with a value of R818 million. A total of 43 export permits to 16 countries were approved, with a value of R137 million. For the third quarter of 2022, 82 import permits were authorised from 17 countries, amounting to R25 million.

In his presentation, Jele revealed that some exports were on hold, including three permits for Saudi Arabia (R505 million); three permits for the United Arab Emirates (R1.45 billion); three permits for Turkey (R20 million); and one permit for Poland (R893 million).

Some permits had been granted to these countries, including nine export permits worth R37 million to Saudi Arabia, along with 59 permits worth R2.9 billion to the United Arab Emirates, and 18 permits worth R2 billion to Turkey. No export permits to Poland had been approved.

Jele gave no clear explanation why exports were on hold in spite of the fact there are no sanctions against Turkey, Poland etc. but did hint at the risk of diversion of destructive weapons, presumably to Ukraine.

Jele also did not mention other permits that are on hold, including for four German government-sponsored Puma M36 armoured ambulances for Burkina Faso, and body armour for Mali. It is assumed these permits have been paused due to the recent military coups, even though ECOWAS (Economic Community of West African States) has lifted economic sanctions.

The South African defence industry has long expressed frustration at the slow pace of export permit processing. In an earlier presentation to the JSCD on 3 November, the Aerospace, Maritime and Defence Industries Association (AMD) explained that its members were struggling because NCACC meetings do not taking place as per the monthly schedule, which slows the export process down. In response, Jele told the Committee on 24 November that although the NCACC does not sit in December or January, the Secretariat operates in those periods.

Other industry complaints are that the Directorate Conventional Arms Control seldom answers phones, does not follow normal working hours, does not tell industry when there is an error with paperwork (industry has to follow up), there is no higher authority than the DCACC to escalate matters to, there is retaliation (delayed permits) if complaints are made, and the permit process is paper-based and thus slow and cumbersome. A digital system is being put in place but has not gone live yet.

“We are aware that some of the challenges faced by industry may be perceived as small issues with no real or severe impact on our business. We wish to re-iterate that these challenges do have a severe impact on our business, job security, income and international relations and confidence,” the industry’s presentation to the JSCD on 3 November stated.

To avoid losing market share and contracts in a highly competitive environment, the industry would like to see high level political support, a speedy bureaucratic process, and support from all instruments of state, as is often the case with other countries.

If the export process is not speeded up, the industry has cautioned that 15 000 direct and 60 000 indirect jobs could be lost.

This is not the first time defence exports have been logjammed. In 2019 it emerged that the NCACC was insisting that it be allowed to inspect customer countries’ facilities to verify compliance and that they must sign end user certificates (EUCs) in which they pledge not to sell their weapons on to third parties. This caused a halt in export approvals to South Africa’s biggest military clients.

Saudi Arabia and the United Arab Emirates, which account for at least a third of South Africa’s arms exports, rejected the inspections which they considered a violation of their sovereignty, whilst Oman and Algeria also refused inspections, and saw imports blocked.

Nearly two years later the impasse was broken and over R5.5 billion worth of transactions were immediately unlocked thanks to an NCACC decision to allow exports, but R2 billion in opportunities were lost because of the impasse and delays emanating from the concerns Saudi Arabia and the UAE had.

AMD last month told the PCDMV that the DCAC/NCACC export permit delays are one of several internal industry challenges along with the declining local defence budget, delay in implementing the Aerospace and Defence Masterplan, lack of engagement between the security cluster and industry, the delayed Industry Lekgotla (now scheduled for early 2023), and lack of resources for the DCAC.

AMD did acknowledge that relations between the industry and NCACC have “improved tremendously” and in February the industry had a meeting with the NCACC chair to improve relations and processes.

On a positive note, AMD said there were opportunities with public/private partnerships for defence projects/acquisitions locally, while the Middle East continues to be interested in South African defence products, and there are opportunities in Europe and India. Africa remains the local industry’s key target market due to proximity and shifting political alliances – these present a unique opportunity to South Africa to take up the slack or fill the vacuum created by the changing geopolitical landscape.

Source: https://www.defenceweb.co.za/featured/billions-of-rands-worth-of-sa-defence-exports-on-hold/

jlamprecht