SA companies get R860m from frigate deal

Nov 20, 2007
Author: Shaun Benton

by Shaun Benton

Cape Town (BuaNews) - South African companies received R860 million worth of contracts from the offset programme related to the purchase of the South African Navy's four new frigates, according to German shipbuilders ThyssenKrupp Marine Systems and Armscor.

The contracts were awarded to South African manufacturers as part of the Defence Industrial Participation (DIP) element of the roughly €500 million spent on the four frigate platforms, said Stephen Laufer, a public relations official for ThyssenKrupp.

The contracts spent on South African companies relates only to the actual frigate platforms, that is the ship without its weapons systems, which were integrated into the frigates in South Africa using high amounts of local content.

The R860 million (€88.124 million), relates directly to contracts for the construction of the actual platforms and not the weapons systems, reporters were told as they were shown around one of the four new frigates at Simonstown Naval Base.

The South African Navy received the last of the four Valour Class MEKO A-200 frigates, the SAS Mendi, in March this year in Port Elizabeth. All four are now in service, having had their weapons systems integrated into the platforms built in Germany.

Locally manufactured elements of the frigate platforms were exported to Germany, thus bringing foreign currency into South Africa, and contributing to the stabilisation of South Africa's balance of payments.

According to Ulrich Scheel, an offset manager for ThyssenKrupp Marine Systems, when the offset programme began South Africa's shipbuilding industry was "ailing" and was given an opportunity to grow and become integrated into global supply chains because of the DIP programme.

South African companies which benefited from contracts relating to the four new frigate platforms include DCD Dorbyl, Bennett's Engineering, Titanium Industries, Booyco Engineering, Siemens Pinetown and MTU in Cape Town.

Parts of the frigates' sophisticated titanium exhaust systems, designed to increase their stealth capacity, were made by South Africans, while the ships' masts were also largely made in the country, reporters were told.

Other South African elements include parts of the electrical, diesel engine, refrigeration and ventilation systems and hydraulic power units, as well as integrated platform management systems and superstructures, were produced by South African firms.

A helicopter refuelling system was built in Cape Town, electrical and power supply switchboards were made in Pinetown, while ventilation modules were made in Johannesburg.

This has given South African firms a competitive advantage internationally, said Andy Richter, formerly head of technology transfer and logistics management for the ThyssenKrupp and now in charge of special projects for the German shipbuilder.

This process has integrated these firms into the global supply chains, with the Malaysian Navy now using some South African-made equipment on the recommendation of ThyssenKrupp.

South Africans did "a good job" and now "we know what we get if we source it [equipment] from South Africa," said Mr Richter.

The Korean and Italian navies are now also using specially-welded titanium exhaust systems, while hydraulics systems are also being supplied internationally, according to ThyssenKrupp and Armscor.

Armscor is responsible for monitoring the Defence Industrial Participation programme, also known as the offset programme, while the Department of Trade and Industry monitors the separate, civilian offset component, which is known as the Industrial Participation Programme.

Separately, the National Industrial Participation element is worth about 500 million, in terms of investment and sales, amounting to 100 percent of the value of the full deal, reporters were told.

With the frigate platforms costing approximately €125m each, there is about R200 million worth of local content on each platform, according to Mr Laufer.

When it comes to the weapons systems added to the platforms, South African content is higher, boosting overall local content to about 60 percent.

The frigates are armed with uMkhonto surface-to-air missiles, which now come recommended by ThyssenKrupp for its other customers.

The Finnish Navy, for instance, has ordered South African-made uMkhonto heat-seeking, self-defence missiles, said Mr Richter.

Made by Denel Air Systems, the uMkhonto missiles are now a "design candidate" internationally, he said.