South Africa Defence and Security Report Q1 2011

Includes 3 FREE quarterly updates

Support for South Africa’s President Jacob Zuma is waning amid an increase in political pressure. Given Zuma's relative inaction on pressing issues, we believe that he may be forced to step down from the leadership of the ruling African National Congress (ANC) and by extension, the presidency, in 2012. The economic recovery is proving fragile and protracted, with a number of recent data releases suggesting that growth will be subdued for some time to come. In October 2010, both Finance Minister Pravin Gordhan and central bank Governor Gill Marcus highlighted the fragile nature of the recovery, as well as the pain exporters are experiencing due to the strong rand, and related loss of trade competitiveness. Amid concomitant high unemployment, the Congress of South African Trade Unions (COSATU) has continued to lobby for a change to South Africa's relatively liberal and market-friendly economic policies. In particular, it has pressed for a more growth-oriented monetary policy, as opposed to the inflationtargeting regime currently in place. As a consequence, South Africa remains blighted by strike action, with workers in many sectors unhappy with their pay packets and employment prospects. In the defence sector, South Africa's Auditor-General has revealed a startling lack of oversight on conventional weapons exports. The opposition Democratic Alliance (DA) spokesman, David Maynier, said in a statement, ‘The Auditor-General demonstrates that South Africa's arms control regime is in a state of advanced crisis, with the upshot that South African arms sales may be fuelling brutal dictators and rogue regimes.’ He said the Auditor-General's report ‘shows that at least 58 arms transactions with clients in at least 26 countries took place without the legally required input by relevant government departments ... For at least 17 transactions there are no delivery verification certificates, meaning arms could have been sold to rogue states; in some cases the certificate indicating the end-user is missing.’ According to The City Press, a national Sunday newspaper, weapons have been sold to ‘among others, Sudan, Gabon, Djibouti, Ethiopia, Algeria, Egypt and Central African Republic. Not all of these are engaged in war, rebellion or oppression, but arms can easily transit through to war-torn areas.’

South Africa’s defence sector is facing increasing foreign competition, as a result of the lifting of arms embargos. In February 2010, The Conventional Arms Trade and its Control in Africa, published by the Arms Management Programme of the Institute for Security Studies (ISS), reported that the Denel Group, South Africa’s largest defence manufacturer, was continuing to make losses, and had to find export markets to make a profit: ‘The Denel Group reported losses of ZAR549mn (US$72mn) and ZAR347 million (US$45mn) in the 2007 and 2008 financial years respectively. The Chief Executive Officer of Denel, however, expects the company to become financially sustainable by 2012.’