Specialist South African electronics, radar and related systems company Reutech, part of the JSE-listed Reunert group, reports that currently, the global political landscape is fairly stable, except for the war in Afghanistan, which means that there is not much demand for conventional defence products. However, the nature of the demand has changed to unconventional products.
Reutech group COO Peter van der Bijl says that, after the Cold War ended in 1991, the demand for conventional defence products declined and many defence companies consolidated.
"Now, terrorist threats are a bigger challenge, but demand lighter, simpler and less visible defence products," he notes.
Meanwhile, military products are also being applied to other industries, such as mining. Reutech Radar Systems' mining survey radar is a derivative of the company's military radar, which indicates that military products often also have a commercial use. However, Van der Bijl says that spending on new technology is declining.
Investment in local production is also declining. Van der Bijl identifies subscale production as a challenge faced by the local defence industry. "South Africa is modest in its purchases, which means that companies can not justify large production runs. Companies need more local support and purchases to be competitive," he asserts.
He adds that exports should provide extra revenue for product innovation, but exports are not as successful as they should be. Local companies currently need many export clients to be innovative. Increased exports can provide revenue for development, which will result in local companies being less dependent on revenue from the South African National Defence Force (SANDF).
"Government does assist with exports, but its priority lies with local production and, therefore, does not provide significant support. The export component of the defence industry must grow for innovation to be possible," he points out.
While innovation, research and development attract people to the industry, there are not many who want to work at factory level. Van der Bijl asserts that, for about 15 years, there were low levels of training and few, new people were introduced to the industry, which has resulted in the current aging skills base.
Although the company has significant competition in the military and commercial market, it holds 100% local market share in electronic fuses and about 20% global market share in electronic fuses and mining radars. Reutech supplies 20% of its products to the commercial market, while it exports 55% of its production.
Meanwhile, the company was contracted by the Royal Norwegian Navy to develop and commission the RRS 210N, a high-accuracy, all-weather naval surveillance radar for helicopter guidance. The product is currently being developed and the installations will be completed by the end of 2011.
Reutech is also developing a remote turret for naval self-defence, a product which has enjoyed significant global interest. It is also working on a new range of electronic fuses, which control the way in which ordnance explodes. Further, Reutech has been contracted to introduce a new generation of airborne and land-based radios. The product is currently being developed and will go into production in 2011.
The company's strategic long-term plan is to be a superior supplier to the SANDF and the local market in niche areas, as well as to expand its niche exports.