IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

The Privatization Of Denel From A Competition Perspective

Listed author(s):
  • Clive Coetzee

    (University of Stellenbosch)

South Africa mostly depended on foreign suppliers for its defence needs up to the beginning of the 1960's. This situation changed dramatically with the implementation of various isolation measures and an international arms embargo in the early 1960's. This compulsory arms embargo on the import and export of armaments to and from South Africa compelled the South African government to become self-sufficient in terms of its defence needs, thus directly contributing to the inception of Amscor and later Denel (Coetzee, 97: 22). Denel, one can argue, would not be in existence today if it were not for the international arms embargo and the subsequent drive for self-sufficiency. Denel (Pty) Ltd was established as a private company, incorporated in terms of the Companies Act on 1 April 1992 with the State as the sole shareholder. The Company is managed by a Board of Directors, appointed by the Minister for Public Enterprises and is an autonomous group (Denel, corporate/default.htm). Denel is thus a public firm doing business as a private company and its core business is defence, i.e. development, manufacturing, research, etc of armaments and related systems/products. Denel, however, can not be regarded as a normal consumer orientated company, because of the nature of its core business, i.e. armaments. Armaments have the ability, among others, to kill and destroy; things that other consumer products and services are not capably of or intended to do. Privatization is in this modern era of market domination/new economy very much the buzzword. The perceived benefits of privatization are also advocated quite rigorously in South Africa and include the traditional arguments against public firms: a low rate of return on capital, modest productivity, unsatisfied customers, lack of clear objectives and political and bureaucratic meddling in management (Majone, 1990: 140). The South African Government has shown interest in privatizing Denel, but is the process already 6 years on the road; a road characterized without real progress. Denel can at present, without doubt, be regarded as a public monopoly. Traditional theory tells us that privatization of a public monopoly neither ends the monopoly power nor the possibility of the use of this power at the consumers expense. The absence of competition can thus induce the monopolist to decrease production and so to increase prices. There is also the fear of job losses, especially in South Africa with its very high unemployment rate and the fear of unregulated armaments sales and exports especially to fundamentalists and governments with poor human rights records. I will in this paper argue for the immediate and full privatization of Denel. Competition fears does not seem to be justified as I will demonstrate that competition in the arms industry at present is as strong as ever in history.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

File URL:
Download Restriction: no

File URL:
Download Restriction: no

Paper provided by EconWPA in its series Microeconomics with number 0205003.

in new window

Date of creation: 23 May 2002
Handle: RePEc:wpa:wuwpmi:0205003
Note: Type of Document - MSWord; prepared on IBM; to print on HP;
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpmi:0205003. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.