Saudi Arabia seeks arms deal with SA

Saudi Arabia is considering taking an equity stake into beleaguered state-owned arms company Denel, Reuters reports.

Chief executive of the Saudi Arabian Military Industries (SAMI) Andreas Schwer has confirmed that the first of what are expected to be several South African partnership deals over arms is expected to be concluded by the end of the year.

The department of public enterprises, which supervises Denel, said that while they can’t give details of any pending partnership deals, they can confirm talks have taken place.

Schwer told Reuters on Monday: “To make it clear, we are in discussions with all major South African companies… not only Denel.”

Private SA arms company The Paramount Group has confirmed that it too has been in talks with SAMI.

Saudi Arabia spends the third most of any country in the world on defence, after the US and China. Their military budget last year was reportedly $70 billion.

A lack of local manufacturing capacity means the country must outsource the majority of its military hardware, and while the country does aim to localise half of its military spending by 2030, they will be relying on foreign partnerships in the interim.

“We are in discussions with the South African government in order to identify opportunities to set up strategic partnerships which could include an equity investment from our side into Denel. It’s not decided yet, but it’s one option,” Schwer said.

It was reported on October 29 that Denel was unable to pay its senior staff members their full salary for the month. This comes after scandals that have engulfed the company after former president Jacob Zuma’s tenure.

President Cyril Ramaphosa recently committed to rooting out corrupt officials when addressing the United Nations General Assembly in New York. This would supposedly help grow South Africa’s economy: “Once we clean up our act in a number of SOEs as well as government departments, that will position South Africa much more as an investment destination.”

The country’s military equipment producer’s struggles come as a blow to Ramaphosa’s pledge, as it still finds itself in the midst of Zuma and Gupta scandals.

In the Gupta emails, it was allegedly revealed Zuma’s lawyer Lungisani Daniel Mantsha was “hand-picked” by the Gupta family and “cultivated” into the man who helped them attempt to capture influence and contracts at Denel, Daily Maverick reported in July.

Mantsha became the chair of Denel in 2015. The Gupta emails allegedly reveal he promptly set about sharing Denel’s confidential information with Gupta associate Ashu Chawla and met with the family in India and Dubai on “five-star trips”.

Denel now needs critical funding and financial support.

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