With an order book bulging at a record R8,6-billion and several significant agreements concluded this year, Denel is confident of good prospects in the foreseeable future.
"We have been very successful in 2002, especially in the second half when some major contracts came through," says Deputy CEO, Mr Max Sisulu. "Denel's Kentron division won the Umkhonto IR missile order from Finland an outstanding feat considering Finland's options to select a system from any of the major European or US manufacturers."
This was followed by the R800-million Armscor contract for the Local Warning Segment (LWS) of the Ground Based Air Defence System (GBADS) for the South African Army.
"Importantly, through this contract Denel is bringing together local and foreign defence companies, as well as Black Empowerment groups."
Right at the outset of the year in January 2002 - Denel signed a license production and marketing agreement with Agusta SpA, an AgustaWestland company. With potential for annual sales of around US$90 million, the agreement allows Denel to both manufacture and market the A109 and A119 Koala helicopters in specified countries around the world, including South East Asia, the Middle East, South America and Africa.
"Denel and South Africa - was benefiting from the retention of jobs in country and skills development for our people, as well as the transfer of sophisticated aerospace technology," explains Sisulu.
Another major agreement with a foreign partner followed. Denel and Turbomeca, part of the SNECMA group of France, created a new company, Turbomeca Africa for the manufacture of engine components and maintenance of helicopter engines and industrial turbines.
The agreement resulted from the Government's restructuring programme for State-owned Enterprises (SOEs) which saw the French company acquiring a majority equity holding (51 per cent) in Denel's Airmotive division, with Denel retaining 49 per cent.
Said Public Enterprises Minister, Mr Jeff Radebe, at the time: "The birth of this new company is in line with Government's overall objective to develop our country and our continent... Turbomeca Africa will strengthen South Africa's position in the global aerospace environment."
This position has been recognized by Germany's official test centre for military aircraft, who conducted flight tests on the Taurus KEPD-350 stand-off weapon at Denel's OTB test range near Bredasdorp. This followed the successful support rendered by OTB and the SAAF's (South African Air Force) Test Flight & Development Centre during November last year.
During June 2002 Denel announced that it had formed a strategic alliance with Germany's Diehl Munitionssysteme GmbH & Co. KG. (DMS) for joint production of Advanced Future Artillery Ammunition Systems (AFAAS).
The strategic alliance resulted in an international team set to become a leading supplier of artillery ammunition and support systems for NATO and the European market.
Shortly afterwards The Boeing Company awarded Denel Aviation, a division of Denel, a contract to manufacture airplane parts for the Boeing 747 and its other commercial airplanes. With Denel Aviation gearing up to produce 400 parts per month for Boeing over a period of nine years, Boeing also provides capital equipment and assistance with the set-up of the operations to Denel. In turn, Denel obtains the coveted Boeing quality accreditation.
South Africa's high technology sector received a boost in April with the agreement between Zeiss Optronik GmbH of Germany and Eloptro, the electro-optical division of Denel, to jointly build at least ten advanced submarine periscopes in Kempton Park.
The periscopes, which cost millions of rands each, are destined for submarines under construction for the South African, Greek, and South Korean navies.
According to Zeiss Optronik submarine periscope unit head Manfred Kriese, the German Submarine Consortium's defence industrial participation (DIP) project was the beginning of a long-term technology partnership between Eloptro and Zeiss Optronik. "We were very pleasantly surprised to find a partner able to be much more than just an extended workbench. We have found design and manufacturing skills we can link straight into our German operations," Kriese said.
In late July 2002 Fitch Ratings awarded Denel an AA (zaf) long-term rating - the second highest investment grade credit rating category for long-term domestic debt.
These ratings reflect Denel as a stable group with a very strong credit quality, which differs only slightly from the country's highest rated issuers. Denel proceeded to mandate JPMorgan, Wipcapital and Investec - its ratings advisers -to lead manage an inaugural bond issue in the domestic bond market and list it on the Bond Exchange of South Africa.
Good progress was made on the sharing of artillery systems technology with Indian defence industries. Whilst Denel demonstrated its formidable T6 autonomous 155mm 52-calibre turret and G5-2000 gun-howitzer in India, Denel-developed 155mm ERFB artillery projectiles were already being manufactured under license in India.
A Strategic Artillery Partnership between South Africa and India, comprising joint development and manufacture, sharing of technologies and marketing of artillery systems is still on the cards.
"Denel was continuing to work very closely with India's defence industry to further develop new artillery systems such our latest T5-2000 truck mounted variant," says Max Sisulu. "The T5-2000 artillery system is being developed in partnership with the BEML company in India."
Denel elected to show this truck-mounted artillery system for the first time publicly at the Africa Aerospace & Defence (AAD2002) exhibition held in Pretoria during September. It elicited wide interest in the market, with authoritative international trade journals giving it extensive editorial coverage.
September 2002 saw Denel initiating the manufacture of the rear fuselage section of the Gripen advanced fighter jet, destined for the Swedish Air Force who has 204 Gripens on order. Denel Aviation was awarded the initial export contract as part of BAE Systems' and Saab's Industrial Participation programme connected to South Africa's acquisition of new defence equipment. The contract helps to further secure jobs, technologies and skills at Denel.
Deputy CEO, Mr Max Sisulu, said at the time that such workshare packages were of crucial benefit to Denel. "They enhance Denel's position as a leading player in the field of aerostructure design and manufacturing. More importantly, they create vital opportunities for the acquisition of new skills crucial to the development of what is a strategically important industry for South Africa".
The locally built rear fuselage was not the first major component manufactured for the Gripen in South Africa. Denel designed a NATO inter-operable stores pylon for the aircraft and production of the Gripen's main landing gear unit commenced last year at Denel Aviation, where the tail plane for the BAE Systems Hawk trainer is also manufactured.
Meanwhile the US Foreign Comparative Testing (FCT) programme has selected Denel's "Igala" 105mm and "Assegai" 155mm artillery ammunition for extensive testing and evaluation. It is said the US armed services compete so fiercely for FCT funding that it is a rare achievement for two products from a single company to be selected. Denel was in discussions with US defence industry companies to further develop its renowned artillery products and systems for the international market.
"Of course, as a small player in the world defence market, Denel is emerging with several key systems or niche products," explains Max Sisulu. "Importantly, as a Non-Aligned nation, our products are increasingly sought by countries that wish to ensure their strategic independence. They don't want the 'strings attached' so often found with other suppliers."
Denel's success in the export market is measured by the figures. More than 50 per cent of its turnover now derives from exports. In some of its ordnance divisions, the figure is close to 90 per cent. Negotiating teams are already busy or in the process of closing major systems contracts, notably for artillery and aerospace systems.
Denel is active in markets as diverse as Africa, the Middle East, South East Asia, South America, Europe and the United States.
As the year draws to a close, the Government approved extended funding for the commissioning into service of the Rooivalk attack helicopter. As the last of the 12 helicopters ordered by the South African Air Force is delivered to No. 16 Squadron at Bloemspruit (near Bloemfontein), Denel is completing integration of its weapons and other systems, as well as logistic support.
It is envisaged that the Rooivalk will provide a key element in peacekeeping operations in which South Africa is increasingly involved.
A major landmine clearance contract in the Democratic Republic of Congo was recently awarded to Denel's Mechem division. Two specialist teams have just commenced this mammoth humanitarian task, which Denel along with the Government is proud to support.
"In terms of human resource development, Denel is equally proud of its record," says Max Sisulu.
For some years now - this year no exception - Denel's Kentron Bridging School has launched young students from historically disadvantaged communities on careers in science, engineering, mathematics and accountancy. As part of Denel's core aerospace business, South African youth get advanced training in aviation industry skills at the Denel Training Academy.
Launched during this year is the unique GET-SET programme (at present a pilot project in Tembisa), aimed exclusively at girls in secondary school to embark them on science, engineering and technical careers.
The Department of Defence has once again this year awarded a contract to Denel for its Youth Foundation Programme. Historically disadvantaged students are trained for highly specialized careers in the SANDF, ranging from technical, pilot and combat, to health and financial positions.
"We are committed to ensure that young South Africans benefit from skills advancement programmes, training and technology transfer, because we need to increase South Africa's pool of Black engineers, accountants, scientists and technicians. Government has taken note of our achievements in this area, and in turn, is giving tremendous support to Denel to continue these advancement programmes."
