Defence Expenditure: Far More than an Insurance Policy Against Unexpected Risk
(Source: Denel Pty Ltd; issued December 3, 2009)
The controversial debate about how much a country should spend on national military applications to ensure that it is ready for any unexpected eventualities has once again come to the fore with the recent release of South Africa’s interim budget.

On the one hand our country continues to face socio-economic challenges within its borders. At the same time, it has committed itself to partnering with other African nations to promote and, if necessary, enforce peace on the continent.

The role of the local defence industry extends well beyond the mere protection of the country’s citizens, however. With South Africa’s defence sector highly sophisticated in terms of our “developing” status, it acts as a strategic technology enabler and incubator for the broader economy, among others.

Zwelakhe Ntshepe, Denel Group Executive: “business development and corporate affairs, explains that this technology catalyst effect is one that other emerging nations are desperately trying to emulate; prioritising the development of their own national defence industries.”

South Africa’s past saw it struggle with extended arms embargoes and sanctions. In the context of its defence industry, these resulted in the prioritised development of its defence capabilities and capacity in order to render it self-sufficient. As such, defence technology in the country was characterised as being far ahead of its time – in certain instances on par with developed nations.

The dawn of a democratic South Africa brought with it the removal of defence embargoes and the establishment of alliances and sound foreign policies. It also resulted in strategic diplomatic relationships. South Africa additionally finds itself in an enviable geographic position, surrounded on three sides by oceans, with the nearest non-African shores thousands of kilometres away and its land borders secured by friendly neighbours.

These neighbours are also military allies through a Southern African Development Community (SADC) Mutual Defence Pact (MDP) and are therefore obliged – by treaty and international law – to prevent their territory, harbours and airspace from being used by third parties for the purposes of aggression against South Africa. They are further obliged to assist in defending our country against such attack. In addition, every navy and air force with the ability to reach South African shores belongs to a key trading partner or otherwise friendly state.

This 15 to 20 year transition towards becoming internationally accepted has seen defence spend drop from 4.5% of GDP in FY 1989/90, to 1.6% in FY 1997/98 and just 1.2% in FY 2008/09. The trend is a depiction of South Africa’s strengthened international relations but it also speaks of the shift in government’s priorities. Democracy in South Africa has also brought with it a greater focus on developmental areas in order to bring the country on par with other emerging economies. The last 10 years have seen poverty relief; social development; and crime prevention take precedence in annual budgets.

What many fail to recognize, however, is that, in the context of our local defence industry, this remains the catalyst for technology development, with companies like Denel contributing directly to job creation. A division like its missile and UAVs business, Denel Dynamics, contributes four additional jobs to South Africa’s employment statistics for every single high-tech professional it employs. This one to four multiplier effect results in almost 3 000 external jobs that are created by the 750 employees on the company’s payroll.

In a similar way, Denel Aviation’s Rooivalk project has given South Africa more than a sophisticated combat support helicopter. It has become an invaluable source of knowledge, intellectual property and a pool of cutting-edge engineers and technologies that have gone on to supplement the aviation and other industries around the world.

The railway network enjoyed by South Africans today is possibly the greatest example – and knock-on benefactor – of technologies with commercial applications emanating from Rooivalk. With over 5 000 engineers contributing to the project in all its various phases, it has added exponential value to the country from a business, technological and skills point of view.

While a steadying decrease in defence spending is evident in the top military spending list for 2008 (where South Africa ranked 37th), it must be noted that world total military expenditure still stood at US$1.473 trillion that year. Even more interesting to note is how developing economies including India (ranked 11th), Brazil (ranked 13th) and Turkey (ranked 16th) are prioritising their investment in the development of their own robust national defence sectors.

As developing economies, their priorities do not differ significantly from those of South Africa. Pressing issues around poverty, education, health and infrastructure remain challenges that will require sizable investment to be changed. In acknowledging how defence contributes to technology developments that can be used in broader industry, as well as promote international relations and encourage trade (such as has been seen in Denel’s partnership with Brazil to develop the Fifth Generation A-Darter missile), these developing nations have found a means to ensure their defence capabilities and simultaneously make a strategic economic contribution to the state.

By recognising the defence industry as an economic enabler, these emerging countries are additionally laying the foundation against perceived – and possible – future threats. These include climate change for example, and its widespread potential to impact on national sovereignty and security due to the displacement of civilians in search of new sources of food and water. Piracy, which has already intensified significantly along East African coasts, and the threat of terrorism could also realistically increase, thereby changing the face of warfare as we know it.

When considering the defence industry in the context of South Africa’s budget then, it is imperative that one views it as the strategic investment it is – both in terms of protecting our country, and making a wide scale and long-term economic contribution.

By maintaining a robust, diverse and adequately prepared local defence industry, South Africans will not only remain safe from looming threats, but continue to benefit from the numerous opportunities it ensures.

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