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Transformation or Stagnation? The South African Defence Industry in the early 21st Century

Listed author(s):
  • Paul Dunne


    (School of Economics, University of the West of England)

  • Richard Haines


    (Nelson Mandela Metropolitan University)

In post-Apartheid South Africa, the ANC Government faced the challenge of restructuring an unsustainably large defence sector. This was in the context of economic and social problems and a declining international arms market. This paper considers the restructuring of the South African industry over that period and more recently, providing a valuable case study of defence industrial restructuring in a small industrialised economy. It considers how the public sector (DENEL) and private sector responded to the cuts in defence spending and the impact of the Government’s decision to modernise the South African Defence Force through foreign procurement, the Strategic Defence Package (SDP) but with extensive offset deals. Within this context the prospects for the industry and the issues surrounding the privatisation of DENEL are considered. The SDP and its offset deals is seen to be continuing to have a considerable impact on the defence industry, but is of questionable value to the South African economy. While the defence projects seem to have some successes the experience of the non defence projects is poor and overall the value of the deals is nowhere near the promises made at the outset. Lack of transparency has created a environment where corruption was almost inevitable and successful industrial planning almost impossible. While there is still some way to go, the scepticism of offset programmes expressed by Brauer and Dunne (2004) seems to be justified by the experience of South Africa.

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Paper provided by Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol in its series Working Papers with number 0514.

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Length: 16 pages
Date of creation: Dec 2005
Handle: RePEc:uwe:wpaper:0514
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  1. Jurgen Brauer & J Paul Dunne, 2005. "Arms Trade Offsets and Development," Working Papers 0504, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  2. Peter Batchelor & Paul Dunne, 2000. "Industrial participation, investment and growth: The case of South Africa's defence-related industry," Development Southern Africa, Taylor & Francis Journals, vol. 17(3), pages 417-435.
  3. Dunne, J. Paul, 1995. "The defense industrial base," Handbook of Defense Economics,in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 14, pages 399-430 Elsevier.
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