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.