Denel has progressed rapidly in a short time.

Kevin O'Toole/LONDON

DENEL HAS COME a long way in a short time, says its chief executive Johan Alberts. It is hard to disagree.

The group was formed a little over three years ago, as South Africa set about putting its state-owned defence and aerospace industries onto a more commercial, business-like footing in readiness for the country's re-emergence on to the world stage.

What has since emerged is a large conglomerate, with sales now just over R3 billion ($840 million) and with a workable spread of businesses ranging from electronics and communications through to the core defence and aerospace operations.

As a rough guide to scale, the Simera aviation grouping, incorporating Atlas Aviation as its military arm accounts for about a quarter of group sales.

Perhaps most impressive is the speed with which the group has established its credentials as a world player. Alberts believes that its aviation businesses are now active in at least 70 countries around the world, while other group interests bring the tally closer to 100. "We've been very busy building a level of confidence in the group," he says.

Take the Atlas Rooivalk attack helicopter. The programme was conceived while South Africa was still in isolation and yet, by 1994, Atlas had been invited to bid for the UK attack-helicopter requirement.

Admittedly, the Rooivalk failed to go the full distance, its involvement regarded by some as a political move to further UK arms sales in South Africa, but the fact that it was there at all as a serious contender counts as a major coup.

Alberts is confident that the Rooivalk programme, now with its third prototype flying, can carve out a healthy niche for itself, especially among countries attracted by the prospect of buying an advanced attack helicopter which is independent of the USA or Europe. The Rooivalk was, after all, designed at a time when South Africa itself required such self-sufficiency.

Competitions in Malaysia, India and elsewhere should give the Rooivalk a chance to prove its worth, says Alberts. He is cautious of talking about customers, but suggests that at least one export deal could be revealed later this year.

To date, the project has only 12 orders from the South African military. It needs around 50 to become a credible programme, admits Kobus Eksteen, who heads Denel's aviation grouping. He too hints that there is business in hand which will help the Rooivalk to clear that barrier.

Military sales are no longer Denel's main preoccupation, however. While sales to the South African forces stood at nearly two-thirds of group turnover when Denel first started out, reliance on such business has been falling steadily. Today, it accounts for less than half of group sales as new commercial and export markets have begun to take off.

The move is reflected within the aviation group. Only 22% of sales are civil, but the strategic goal is for 60%. Alberts adds that this growth is in the context of a planned doubling in aviation turnover, to R1.5 billion. "If we achieve that in the next four to five years we'll be doing well," he says.

Simera has built on its strengths in aircraft modification and maintenance (learned during the years of embargo) with a drive into international airline markets, including neighboring African nations. "We could very easily become the maintenance workshop for Africa," says Alberts.

Eksteen says that the new civil-maintenance business has booked in 35 aircraft for 1996, ranging from the Boeing 727 and McDonnell Douglas DC-9 upwards. He adds that this is just a "starting point".

By 1996, Simera will also have started shipping the first cargo-conversion kits for the Airbus A300 under its co-operation agreement with Daimler-Benz Aerospace (DASA).

Work has begun, on the first four kits all against customers orders, says Eksteen. The first should be in the air by the end of 1996, he adds.

Further co-operation with DASA is in prospect under the wide-ranging promises of investment in South Africa announced in 1994 by the German group. Discussions over Simera's involvement in Dornier 228 production are probably not viable, says Eksteen, but he believes that there could be a future for cargo conversions of the Dornier 328.

Discussions continue, he says, admitting that it is still Simera's long-term goal to see aircraft assembly take place in South Africa.

Another example of international partnership has seen Simera produce the accessory gearbox for the Rolls-Royce RB.211-535, and the group sees no reason that this cannot be expanded to other engine parts or other gearboxes.

The only area in which Denel cannot seek alliances is the USA, where South Africa is under a denial order from the State Department over allegations of sanctions busting. Alberts hopes that inter-Government efforts to lift the ban will soon bear fruit. "We know that US companies want to work in collaboration with us. The order has to be lifted at some point, and I think it will happen sooner rather than later," he says.

Removal of the denial order is perhaps the last act in separating Denel from past politics. Despite its state ownership, Alberts argues that Denel is now thoroughly independent, "...doing business like any other international company".

With the group making respectable profits (a net result of R260 million) in 1994 and showing little debt, Alberts says that privatisation is not a pressing issue for Denel or its Government owner. It is not every government owner, which can say the same.

Source: Flight International