BMI's Executive Summary

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With Presidential elections due in 2009, the succession race within the ruling African National Congress (ANC) was in full swing at the end of 2007. As it enters 2008 South Africa faces internal and external security threats. Internally, it faces the daunting challenges of a well-established organised crime and drug trafficking network, a vast wealth disparity and large scale HIV infection within its population, not to mention ongoing racial tensions fuelling security threats such as the right-wing Afrikaner group, Die Boeremag. Its security concerns also extend beyond its borders. As the hegemonic power in the continent, and particularly in the Southern Great Lakes region, it has a heavy involvement in the continent's trouble spots in terms of security forces/peacekeeping deployments. While the numerous security threats in the region have the potential to destabilise South Africa on a variety of levels, the potential for its neighbours – particularly Zimbabwe – to destabilise it economically and politically is especially strong.

The defence industry witnessed major upheaval when the lifting of the arms embargoes on South Africa led to competition with foreign companies. With the South African National Defence Force (SANDF) no longer a captive customer of the sector, companies have had to shed large sections of their workforce, leading to dwindling numbers. Recent procurement packages may be the first step in reversing this trend. The future of the South African defence industry depends on its successful break into the international market. Joint ventures will aid the country in gaining a technological lead in key areas. Currently, the biggest single long-term problem within the defence industry is the lack of research and development funding and policy. Several defence industrial participation (DIP) contracts have been signed with South African firms, which will assist in areas of defence electronics.

Arms exports are proving a more vital area of sales for South African defence companies, and should be the main catalyst for any growth in the industry. Encouraging figures from key defence companies seem to suggest a growing export market. Meanwhile, arms imports should increase substantially with the delivery of the major weapons platforms recently ordered by the government. The recent normalisation of relations between the US and South Africa offers hope for better trade.

BMI concludes that the state's political, economic and security structures remain relatively strong. The country is plagued with very high crime HIV/AIDS infection rates, but neither of these poses a risk to overall stability. Recent restructuring and moves to modernise the South African armed forces have created the best-equipped and most advanced military on the African Continent. The defence industry is growing and making indents into international markets.

Contents

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Chapter 1 - Executive Summary

SWOT Analysis

South Africa Political SWOT

South Africa Security SWOT

South Africa Defence Industry SWOT

South Africa Economic SWOT

South Africa Business Environment SWOT

Chapter 2 - Political Overview

Domestic Political Outlook

The (Limited) Risks Of A Zuma Presidency

Whither Zuma?

Risks To Business Environment

Ramaphose Enters The Fray

The Jobs And Skills Conundrum

Crime Revisited

Keeping Up With The Bad Guys

HIV/AIDS Infection Rate Stabilises…For Now

Policy Implications

Chapter 3 - Security Risk Analysis

BMI’s Security Ratings

Risk Ratings

Table: Regional Security Ratings

Table: State Terrorism Vulnerability Index

Regional Security: The Middle East And North Africa

Inter-State Conflicts

Internal Conflicts

South Africa Security Risk Ratings

South Africa Conflict Risk

South Africa Terrorism Risk

South Africa Physical Safety Risk

Chapter 4 - Security Overview

Internal Security Situation

Table: South Africa Insurgent Groups

Organised Crime

HIV/AIDS

Township Unrest

External Security Situation

African Union

Border Security

Chapter 5 - Military Structure & Defence Industry

Armed Forces

Current Strength

Historical Strength

New Role For The SANDF

Acquisitions

HIV/AIDS

‘Army Vision 2020’

International Deployments

Table: South Africa Foreign Deployments

Weapons Of Mass Destruction

Market Structure

Arms Trade Overview

Imports

Exports

Industry Trends & Developments

Table: Key Players – South Africa Defence Sector

Procurement Trends & Developments

Air Force

Navy

Army

Chapter 6 - Industry Forecast Scenario

Armed Forces

Table: South Africa Defence Sector – Armed Forces

Table: South Africa Defence Sector – Government Expenditure

Key Risks To BMI’s Forecast Scenario

Chapter 7 - Macroeconomic Forecast

Table: Economic Indicators

Chapter 8 - Company Profiles

Denel

ADS (African Defence Systems)

Grintek Defence & Technologies

Reutech

BAE Systems, Land Systems South Africa

Chapter 9 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Defence Industry

Sources

Chapter 10 - Appendix A: Risk Ratings Methodology

Conflict Risk Methodology

Terrorism Risk Methodology

Physical Safety Risk Methodology

Overall Risk Rating

State Vulnerability Index

Competitive Landscape for MEA Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's Middle East & Africa Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: