Ngwane Defence Group & Council for Scientific &Industrial Research (Defence, Peace, Safety & Security Section): briefings

DEFENCE PORTFOLIO COMMITTEE
6 March 2007
NGWANE DEFENCE GROUP AND COUNCIL FOR SCIENTIFIC AND INDUSTRIAL RESEARCH (DEFENCE, PEACE, SAFETY AND SECURITY SECTION): BRIEFINGS

Chairperson: Ms T Tobias (ANC)

Documents handed out:
CSIR presentation
Ngwane Defence Group presentation

Audio recording of the meeting

SUMMARY
Ngwane Defence Group briefed the committee on its capabilities and areas of expertise – military land system solutions.  The company was formed during 2006 and brings together a number of innovative and capable land defence system providers. A core grievance was the need for government to utilise the local expertise in South African defence companies instead of using foreign defence companies. The company demonstrated that it possessed technologies that were industry leading, especially in terms of land vehicle systems.

The Defence, Peace, Safety and Security section of the Council for Scientific and Industrial Research briefed the Committee on its role as a leading technology supplier to manufacturers. It presented various successful projects that were locally initiated and developed in conjunction with either local or foreign manufacturers.

Both groups stressed the need for government to harness the abundance of local technology in the defence industry as opposed to outsourcing projects to (sometimes inferior) foreign companies. The possession of intellectual property rights was highlighted and both groups demonstrated the strategic need for these rights to be kept local and not be relinquished to foreign entities.

The Committee broadly concurred, but stressed the need to incorporate Denel into the next round of discussions as they are a major role player. Furthermore the Committee was slightly sceptical if Ngwane would be any different from the existing local defence companies. Further discussion was deemed necessary.

MINUTES
Presentation by Ngwane Defence Group (NDG)
Gen (Ret) Siphiwe Nyanda (Chief Executive Officer (CEO)) presented background to the creation, role, purpose and objectives of NDG. Particular emphasis was placed on IVEMA (Pty) Ltd, Rippel Effect, Truvello and Industrial and Automotive Design South Africa (IAD). These companies (amongst others) comprised NDG. The problem of foreign company control of the South African Defence Related Industry (SADRI) was outlined, as well as the lack of government funding for Research and Development (R&D) of indigenous products. The need for independent R&D was stressed. The lack of government investment was cited as a reason for the decline in the standards of South African military vehicle systems.

Discussion
 
Mr V Ndlovu (IFP) asked whether this presentation was given to the Ministry of Defence (MoD) and whether these recommendations had been forwarded to the different sections of the Department of Defence (DoD).

Gen Nyanda replied that they were in constant communication with the DoD, but have not made recommendations in a structured way, despite having presented papers to the DoD on getting out of the quagmire with respect to the Land System Industry (LSI). NDG has been in consultation with a research group, sponsored by the DoD, the Department of Public Enterprises (DPE) and the Department of Trade and Industry (DTI), seeking to create a viable defence industry strategy. This group was established on NDG’s request. Government was funnelling some money into the survival of the LSI.

Mr O Monareng (ANC) appreciated that NDG shared information with the Committee. Local companies should receive the largest share of the SADRI, but this will take time. What did the subsidiary companies of NDG do? Furthermore he requested the ratio of foreign to local business of NDG.

Gen Nyanda responded that the need for vehicles for the SA National Defence Force (SANDF) was small compared to the foreign market. It was incumbent upon them to resuscitate the Land Defence Technology (LDT) sector and support the military. Due to government awarding contracts to foreign companies the ratio of external business is higher. He highlighted that if their products were good enough for export then they were surely good enough for local use. Subsidiaries, Sonoro and Truvello, were not elaborated on due to the fact that Rippel Effect markets their products.

Mr J Schippers (ANC) asked whether NDG needed National Conventional Arms Control Committee (NCACC) approval to sell to foreign countries and whether NDG received or needed R&D grants – and if so to what extent.

Gen Nyanda replied that they did need approval and that the subsidiary companies were all registered with the NCACC. NDG itself was in the process of doing so. He highlighted that there were very long delays in getting approval for export permits which hurt their business.

Mr L Diale (ANC) asked whether NDG encouraged female participation.

An ANC Member stated that the NDG’s initiatives to recapture the local market were welcome. What interaction did NDG have with Denel?

Gen Nyanda responded that the research group mentioned above was in talks with Denel about an overall industry strategy to combat the encroachment of foreign companies. He stressed that both companies needed each other.

Mr Monareng stated that contracts were often given to joint foreign-local ventures because they were more cost effective. He questioned the percentage of managerial positions occupied by previously disadvantaged individuals and asked about skill/youth development programmes.

The Chairperson believed that the training of individuals in technical skills needed to reflect the demographics of South Africa.

Gen Nyanda replied that they did not have a thorough strategy for transformation, but stressed that the immediate problem was the retention of skilled personnel in the country. The issue of transformation will be addressed, however.

Mr Schippers asked about the problem of foreign companies copying South African land vehicle designs. He restated his question about the need for government grants.

Gen Nyanda replied that the issue of grants was complicated as in some instances it would be welcomed. However in projects where NDG desired to retain the intellectual property rights they would utilise their own funding as the funder normally retained these rights. The lack of major R&D projects subsequent to the strategic defence procurement package had resulted in highly skilled South Africans leaving in droves for foreign companies. This led to the dispersal of South African technology. In the case of the Gila vehicle, if sold to the US, they would be required to sell the intellectual property rights as well. However if the vehicle was sold locally, the rights would remain South African.

Brig Gen D De Lange (Group Executive: Business Development) stated that whilst there were benefits to acquiring superior foreign technology, the arms packages did not have to be entirely foreign. South Africa did possess viable military technology. Furthermore, local purchases would enable more rapid transformation of the industry.

Mr Ndlovu asked about the possibility of a discussion between NDG, Denel and government to reconcile the “irreconcilable”.

The Chairperson stated that the Committee could not formulate a clear policy on the issue until a discussion of its role.

Gen Nyanda expressed his openness to any suggestions. He expressed NDG’s interest in issues of a broader nature with regards to the SADRI and called for discussions including other industry role players.

The Chairperson expressed agreement and felt the Committee should play a facilitating role in such a discussion. She requested regular feedback from Gen Nyanda on developments.

Presentation by the Council for Scientific and Industrial Research (CSIR)
Mr Andre Nepgen (Executive Director: Defence, Peace, Safety and Security (DPSS) section) went through the presentation dealing with the structure, mandate and focus of the DPSS. Of special importance was the ability of the CSIR-DPSS to initiate a concept and then allow local industry to execute the project – allowing for the local retention of intellectual property rights. A range of products was discussed – all exhibiting superior or equal quality to foreign products.  The vital need to create a Defence Evaluation and Research Institute (DERI) out of all the elements of the industry was stressed.

Discussion
Mr Diale asked about incentives to attract young people, especially blacks, into the organisation.

Mr Nepgen replied that they had initiated school programmes to attract science and maths learners as well as offering bursaries and internships to potential engineering students.

Mr Schippers asked why so many skilled personnel had been lost. Why was the Rooivalk Attack Helicopter not attractive to foreign buyers?

Mr Nepgen responded that the genesis of the Rooivalk lay with the CSIR twenty years ago in the Alpha X1 prototype. He could not comment on the marketing status and prospects of the Rooivalk as CSIR did not have any role there. CSIR's contribution originally was the concepts (such as the X1) that led to the Rooivalk and subsequent testing on some of its characteristics and subsystems. The manufacturing and marketing was the responsibility of Denel. The loss of skilled personnel was symptomatic of the uncertainty about the future of the defence environment as well as the competitive financial packages offered by private companies.

An ANC Member asked whether the DPSS’s technological capabilities were all locally developed.

Mr Nepgen replied in the affirmative and stated that Safety and Security was a new area in Science and Technology. This area would be addressed because of structural problems in the general South African Safety and Security sector.

Mr Nepgen extended an invitation to the Committee to visit the CSIR’s facilities. He put the CSIR’s parliamentary office at the Committee’s disposal.

The meeting was adjourned.