UK group ponders Denel opportunities

British Aerospace and defence industrial giant BAE Systems has had its interest in South African State-owned defence industrial group Denel piqued again by the latter's proposed restructuring strategy.

"We looked at Denel for quite a long period of time some years ago; we came to the conclusion that, while parts of Denel could have a long-term future, we saw that the structure at that time was undercapitalised," recounts BAE Systems chief operating officer for Europe, Africa and Asia Chris Geoghegan.

"We did a lot of due diligence and decided to withdraw," he adds.

In those days, BAE Systems was faced by the choice of taking a share in the whole Denel group or leaving it - it chose to leave it.

Now, however, the new strategy proposed by Denel CEO Shaun Liebenberg to save the beleagured South African group is to turn Denel into a holding company and reorganise its operations into a number of subsidiary companies, and part or most of each of these would then be sold to local and/or international investors (see Engineering News October 28, 2005).

"Now, this Denel strategy makes the ‘jewels in the crown' more attractive," highlights Geog-hegan.

"We already have a number of relationships with Denel, in electronics, munitions, and also through BAE Systems South African subsidiary Land Systems OMC; we will investigate what is on offer," he states.

"But we haven't made any decisions so far," he cautions.

"Denel has approached us to discuss the various interfaces they have with us, and we will discuss these," he reveals.

"But it is very early days and it's too early to make decisions," he warns.

BAE Systems has become an internationalised, global company, to an extent that is not yet fully recognised outside the group.

"The whole aerospace industry is becoming increasingly globalised - barriers are breaking down; while US companies benefit from the size of their home market, even they are making substantial overseas industrial investments," he explains.

This is one of the reasons the UK-based group is interested in the industrial capabilities of South Africa.

It believes that there is a place for foreign investment into national industries that is compatible with national planning.

"We will be discussing with the South African government over the coming months how they want to see us developing in South Africa," he points out.

"We genuinely have to have multiple home markets, which is what requires us to inter- nationalise," he affirms.

"South Africa should be our focus in Africa, for economic and political reasons," adds South Africa-based BAE Systems Executive vice- president for Africa Michael Gavin.

The group is continuing to explore business opportunities in this country, and elsewhere on the continent.

Unlike some global groups, BAE Systems defines Africa as the whole continent, not just as sub-Saharan Africa.

"The key African markets are South Africa and Egypt, with growing markets in Algeria and Libya, as well as Botswana and Kenya," he sums up. Zimbabwe is under UK and EU embargo at the moment.

"Each of our international businesses operates under the laws of its host country," he clarifies.

Meanwhile, the BAE Systems Hawk lead-in fighter-trainer programme for the South African Air Force (SAAF) continues to progress.

South Africa is buying 24 Hawks, of which 23 have been or are being assembled by Denel at its Kempton Park/Johannesburg International Airport facility.

"The contract specification avionics software is now flying on the flight test Hawk at the Flight Test and Development Centre at Bredasdorp, in the Western Cape; the inevitable glitches have all been sorted out and this software will now be incorporated into the rest of the SAAF's Hawk fleet," reports BAE Systems South African spokes- person Linden Birns.

"The final specification engine is also being fitted to the aircraft - six are now fitted; all the aircraft will be delivered to full specification or nearly full specification, and the latter will be upgraded soon afterwards," he assures.

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