UK giant wants to acquire 30% stake in publicly owned South African defence company

Denel is preparing to participate in imminent South African Government-led negotiations with BAE Systems over the UK giant's proposed acquisition of a 30% stake in the publicly owned defence company. The talks are due to start in the wake of Denel's announcement of a long-awaited return to profitability.

Overall sales in the year to March were up 9% to R3.7 billion ($422,000), but increased by an average of 14% for the businesses the company is to retain in a restructuring scheme. The after-tax profit of R24 million compares with a R201 million deficit a year earlier.

Denel was hit by a 60% drop in orders following the start of the country's transition to a full democracy in 1992. But its strategy of switching focus to exports is beginning to pay off with overseas sales now accounting for 53% of revenues.

"We have turned the company around from losing market share domestically," says Denel chief executive Flip Botha, speaking at last week's Langkawi International Maritime and Aerospace (LIMA) show in Malaysia. But, he says, much restructuring remains to be done and no increase in profits is forecast for this year.

In addition to the anticipated BAE investment, the government has agreed to allow Snecma subsidiary Turbomeca to acquire a 51% stake in Denel's Airmotive division, which specialises in the production and maintenance of aero-engine components. This is due to become the southern Africa regional service centre.

"With these equity part-nerships we hope to get more access to overseas markets, technology and training opportunities," says Botha.

Denel is meanwhile renewing efforts to establish the Rooivalk as a significant player in the international attack helicopter market, having once again demonstrated the aircraft at LIMA as part of its renewed sales campaign in Malaysia. "We are currently looking at how we can satisfy the Malaysian side with local industry co-operation, technology transfer and training," says Botha.

Denel hopes the Rooivalk's prospects will be further boosted with BAE's assistance in export sales campaigns. It also plans to focus on its self-propelled artillery product range which complements that of BAE, and its Seeker unmanned air vehicle.

South African Government companies Armscor and Denel, and privately-owned Aerosud have launched a programme to refurbish ex-South African Air Force Dassault Mirage F1s for export.

The upgrade includes the installation of a Russian Klimov RD33 engine to replace the existing Snecma Atar powerplant. The first aircraft flew earlier this month.

Source: Flight International