Cabinet decision on Strategic Defence Procurement


15 September 1999

In November last year, Cabinet announced its preferred suppliers for the procurement of defence equipment for the SANDF.

The Cabinet took this decision on the basis of the comprehensive Defence Review that was conducted in a consultative manner, and which achieved broad consensus among virtually all sectors of the South African population. This Review concluded that the specific force design required for South Africa should be a high technology core force, sized for peace-time but which could be expanded in the face of any emerging threat.

The Cabinet’s decision on the preferred suppliers was informed by such critical factors as technical capability, the value of the equipment, as well as the industrial investment and economic offers made. However, Cabinet felt it necessary to examine affordability of the package, given the socio-economic imperatives of the country. Mr Jayendra Naidoo was appointed by the then Deputy President Thabo Mbeki to follow this matter up, working with officials in various government departments.

We are happy to announce that this process has now been completed. The Cabinet today decided to procure the following military equipment:

Nine dual-seater Gripen and twelve Hawk Aircraft from British Aerospace/SAAB to replace the current Cheetah and the Impala Aircraft. A further option has been taken on the balance of the 12 Hawks and 19 single-seater Gripens.

Four Patrol Corvettes from the German Frigate Consortium to replace the present ageing strike crafts, which are more than 30 years old.

Thirty light utility helicopters from the Italian helicopter manufacturer, Augusta, which will replace the Allouette helicopters which have been in service in the air force for over 40 years.

Three submarines from the German Submarine Consortium, which will replace the ageing Daphne submarines, which have been in service in the navy for more than 30 years.

The cost of the equipment package is R21.3 billion over the next 8 years. If the option to procure additional equipment is exercised, the total equipment cost will rise by R8.5 billion to R29.9 billion over 12 years. The options must be exercised by not later than the year 2004.

The cost of R21.3 billion includes all statutory costs like VAT, custom duties, freight, export credit guarantees and programme management. This compares with the estimate last November of a costs of R31 billion, which included equipment cost of R29.7 billion, together with provisions for price escalation and the cost of financial cover required.

The conversion of 30% of the original contract value into options ensures that the SANDF can obtain the required equipment, as needed, taking full advantage of the excellent financing and industrial participation terms negotiated but without creating immediate fiscal pressures. Should the South African government decide not to take the outstanding equipment, it will not face any penalties or costs of cancelling the options.

Cabinet is fully satisfied regarding the offset arrangements attached to this package, which will benefit the economy and advance the socio-economic interests of the country.

The results of this whole process is an affordable defence package combined with an industrial and economic investment package spanning a variety of industrial sectors and under-pinning the government’s industrial strategy.

Issued by: Government Communications (GCIS)

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Year: 
1999
Media Statement date: 
Wednesday, September 15, 1999