New info on Saab-Denel relations

2011-08-30 10:05

A confidential and critical report on Swedish company Saab’s involvement in the struggling South African arms manufacturer, Denel, has raised new questions about how much the country benefited from the multibillion-dollar arms deal.

Media24 Investigations has obtained a government report into a Saab-Denel deal – for which Saab claimed a more than $1.7 billion investment benefit from the state – after filing an application under access to information law with the Department of Trade and Industry.

The government has until now refused to make it public.Saab’s role in the arms deal is currently under renewed scrutiny here and in Sweden after it was revealed in June that it had been party to more than R24 million in payments to government-linked consultant Fana Hlongwane.

Saab and BAE’s contracts to supply Hawk and Gripen fighter aircraft to the air force comprised the lion’s share of the now-infamous arms deal.

In terms of the deal they were supposed to make reciprocal investments in South Africa to offset the costs of the arms deal and to create jobs.

The Saab investment in Denel’s operation formed part of that arrangement.

The report to the Department of Trade and Industry was handed to the government in February last year and questioned whether Saab had met all the obligations it claimed in terms of the $1.7 billion in investment “credits” it was awarded.

The joint business – Denel Saab Aerostructures – was founded in 2006, and Saab had a 20% share in it and was responsible for management.

It was hoped that Saab’s expertise could help Denel to profitability, could help to bring in new business and stop it from losing a major contract to Airbus to supply parts for the new A400M military cargo plane.

This report contains the first clear detail of Saab’s involvement in the Denel company.

Although significant portions of the 100-page report have been censored, it is clear that Saab’s intervention did not work, although the authors of the report acknowledged that Saab had passed on some benefits in manufacturing processes and management practices.

The findings included that:

» Saab could not reduce losses in Denel’s sales department;

» Saab’s interventions had focused on processes rather than cost-cutting;» Saab’s team was too small to make a significant difference;

» Despite Saab’s help Denel could not always deliver its products on time;

» A Denel official had noted that there was not a “political will” to commit to a well-coordinated effort at changing the company’s systems and procedures, and;

» Saab’s interventions were considered “ad hoc”. In the end Saab was unable to save the Airbus supply contract and it was cancelled in May last year.

The report also contains some embarrassing findings about the Denel operations, which included observations that:

» Due to a lack of access control, staff were able to carry away valuable inventory from the warehouses;

» Staff did not always know how to deal with highly sensitive material, such as special aeroplane metals or chemicals;

» That Denel’s global reputation was so bad as a buyer that it struggled to get raw materials and components on the international market.Saab and Denel were approached for comment late yesterday but had not responded at the time of publication.

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