Saab may soon announce a co-operation deal with South African state owned aviation manufacturer Denel Aerospace, according to a Africascan source. Saab confirms that the parties have ongoing discussions, but denies that they are nowhere near a conclusion.
JOHANNESBURG. Saab´s CEO Åke Svensson on Friday 27 October unveiled the first delivery of the Gripen Jetfighter to South Africa in a hangar at Saab´s production plant in Linköping, Sweden.
According to industry sources the plan was also that he, together with South Africa´s minister of public enterprises Alec Erwin, should announce that the Swedish arms manufacturer would take a substantial stake in Denel Aerospace Systems (DAS), the state owned aircraft component manufacturer in South Africa that forms part of the larger Denel group.
That did not happen. But according to Saab there are elaborate discussions.
“Yes, we have said before that we are talking to Denel. We would like to deepen the co-operation with Denel and work with them more and more. It is an ongoing discussion, which is natural as we see South Africa as a home market”, said Peter Larsson to Africascan.
Another spokesperson for Saab in South Africa, Steven Laufer, said that the talks are nowhere near completion.
“Denel is talking to everyone right now”, he said.
Africascan´s sources states that a Denel deal of sorts is in the pipeline. But that Saab is likely to wait until it has assurances from the South African state that it will take care of Denel´s financial mess before it enters any close co-operation.
South Africa´s overall intention is clear. The director-general for public enterprises, Portia Molefe, said on Monday 30 October (2005), to Johannesburg newspaper Business Report, that the ministry of public enterprises is keen to sell off Denel´s non core businesses and to enter joint ventures and strategic production alliances with international firms with market access in the European defence industry.
While Saab prefers to downplay the discussions there is too much pointing towards Saab as a preferred partner.
Saab´s Chairman Anders Scharp and CEO Åke Svensson met Denel in May this year. Further meetings are in the pipeline; a meeting was scheduled for next week, according to Africascan´s information, but it was postponed. (Editorial question: Why involve the top leadership, if the discussions have not reached a conclusive stage?)
- Saab, most likely, has plenty of insights about Denel as the former CEO Bengt Halse is the new Chairman of Denel.
- Denel´s newly appointed CEO, Shaun Liebenberg, comes from the now Saab-owned aviation technology group Grintek.
Saab, together with BAE Systems has become Denel´s most important strategic partner.
- BAE has already walked away from a deal with Denel; Saab is seen as more suitable partner from a size-, corporate culture and political point of view.
Saab is seen as the most reliable of the various arms companies that it signed major deals with in 1999. Saab is an ahead on schedule with its Gripen deliveries and its industrial offset programme has performed better than other programmes.
South Africa sent Alec Erwin, the minister in charge of sorting out Denel, instead of the minister of defence, to the ceremony in Linköping.
A stake or a JV with Denel would be interesting strategically as well. Saab would be able to get full support from South Africa in negotiations with other Southern Hemisphere markets where South Africa´s has strong political relations, such as with Brazil and India. <br>
Denel´s Shaun Liebenberg is clear in his statements that he wants to fast-track strategic deals with defence companies, where he has given specific reference to Saab, in order to secure urgently needed funds from the Government.
“It is a deal that South Africa has pushed for a long time. Saab clearly believes that it must do this in order to satisfy its commitments that flows from South Africa´s purchase of Gripen”, comments an industry analyst.
The South African government and Saab know each other very well by now. Saab and BAE Systems won a contract to sell 28 Gripen and 24 Hawk amid stiff competition in a controversial arms deal that was signed in 1999. Saab/BAE committed themselves to deliver offsets worth three times the value of the EUR 1.8 billion (SEK 22 billion) sale of jetfighters.
The cut-off date for the delivery of the offsets is 2011. Any unauthorized deviation could cost Saab-BAE in terms of penalties (10 percent of the purchase price) or the loss of the remaining underlying contracts.
South Africa is, at least publicly, very pleased with Saab-BAE Systems product- and offset delivery so far.
The pair received the highest marks in the assessment of the offsets in a report to the South African parliament in October.
Saab deals with Denel alone though, without BAE´s involvement. The British partner had lengthy negotiations with South Africa up until 2003 to purchase 30 percent stake in the Denel group – but the parties could not find enough common ground to conclude a deal.
(First published in Africascan online edition 23 November 2005.)