The South African Government is stepping up pressure on Saab and BAE Systems to guarantee offset performance on the nation's Gripen and Hawk deals, amid acknowledgement by senior programme officials that economic development goals linked to the deals are proving difficult to achieve.
Key South African Government decisions on follow-on orders for both aircraft types depend on bolstering the economy and creating jobs, with less than three years available in which to meet initial programme goals if further orders are to be placed.
South African defence and government officials at the show in Pretoria last week warned that the unsatisfactory pace of meeting programme goals was a key concern.
Vanan Pillay, the Department of Trade and Industry director for industrial participation, said: "More is necessary to meet the milestones. They are rigorous milestones and not easy to achieve, and there is a required ramp-up to achieve them."
Pillay is charged with monitoring fulfilment of the R44 billion ($7.2 billion) worth of non-defence-related offsets linked to the Gripen and Hawk buy under a National Industrial Programme (NIP) aimed at wealth creation for the South African economy. Saab-BAE must also place R9 billion worth of direct defence-related offset work with local industry under a separate Defence Industrial Participation (DIP) programme.
The Anglo-Swedish venture was contracted in December last year to supply nine twin-seat Gripen fighters and 12 Hawk 100s. The deal is worth R15.7billion. The NIP and DIP programmes began in April and are governed by stringent milestones agreed between the companies, the South African Department of Trade and Industry, and the State armaments agency, Armscor.
The South African Government does not intend to exercise signed options for a further 19 single seat Gripens and 12 more Hawks unless full offset obligations are met.
South African Defence Minister Mosiuoa Lekota said: "We have so organised the contract that if we were to come to the conclusion that we do not need to exercise the option, then we can withdraw without any penalties being attached." A decision on the Hawks is required by 2002 and on the Gripens by 2004.
The Chief of the South African Air Force, Lt Gen Roelf Beukes, remains optimistic about the options being exercised. "I don't see a problem and personally I think it will go ahead," he told Flight International.
The decision to exercise follow-on orders is contingent upon the government's ability to finance the remainder of the aircraft deal.
Armscor chairman Ron Haywood told Flight International: "We want to see things signed up and happening. This is a financial package: what we want and what we can afford have to be right. We've got a deal here that they [Saab and BAE] have to perform on. Otherwise, it will cost them money and face."
Speaking at the show, Sir Charles Masefield, BAE Systems group managing director and chief negotiator for the 1999 defence package, said that the consortium was ahead of target in terms of defence-related offsets, but acknowledged that the NIP targets would only be achieved over a longer timeframe.
"It's the beginning of an 11-year programme, and the curve from April is a flat curve because of the enablement time needed... We will deliver $7.2 billion worth of offsets at the end of 11 years."
Source: Flight International
