Armscor considering cancelling Denel contract for procurement of SANDF vehicles

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Weapons acquisition company Armscor says it is weighing the possibility of cancelling its contract with Denel to procure Badger infantry fighting vehicles for the SANDF. State arms manufacturer, Denel, has failed to deliver the vehicles that were ordered more than a decade ago under project Hoefyster.

The company has not completed the first phase of the project which was supposed to be delivered in 2012.

Denel and Armscor were briefing the Joint Standing Committee on Defence on the progress regarding the acquisition.

The Defence Force has raised concern about the non-delivery of the vehicles for some time now. On top of the known delays, Denel Chief Operating Officer William Hlakwane provided information that surprised even their clients.

“Battalion one it was scheduled for 2023 revised date is 2024. Bat 2 was 2027 we are focussing 2028. These dates depend on moving parts. We will communicate with Armscor as well as the client,” Hlakwane said.

While Denel initially painted an optimistic picture, Armscor, however, expressed its frustration. General Manager for acquisition, Sipho Mkhwanazi told the committee that they are worried that the contract is becoming unaffordable.

“If need be a decision of cancellation is to be cancelled, it has to be taken urgently. Each day that passes, we are experiencing an escalation in cost. If we delay the decision; that is an additional risk for the DOD and Armscor.”

Armscor said the information they have received from Denel, including the cost and revised dates, make the project unaffordable.

Deputy Defence Minister Thabang Makwetla told the committee that they are not happy with the Denel’s performance. He indicated that they will soon meet with the company to try and find a way forward.

He added that the cancellation of the contract is firmly on the table under the right conditions.

“If we had the first phase executed as planned, possibly it would have been relatively workable to walk away because the design and development would be there as the value that Armscor can keep going back to later on when the situation allows.”

MPs were just as unhappy. MP Thabo Mmutle said delaying the decision on cancellation of the contract could expose the government to further harm.

“We must look at the money spent and the progress. The more we delay the more expensive it becomes unless if things in Denel have turned around. Because they keep on pushing the deadline to the right and they are not even engaging the client.”

Denel financial woes

Workers at Denel may not be paid their May salaries. The struggling company said the COVID-19 crisis has had a devastating impact on its performance.

Denel said last week that the decision not to pay salaries is highly regrettable, but there are no other options.

Trade union Solidarity spokesperson Helgard Cronje said that they are worried about the welfare of employees.

“So obviously we are very worried about the welfare of our members. It is a difficult situation in the sense that the solutions are very difficult to find. We are of the view that, at the end of the day, Denel doesn’t have the money available. They have been struggling financially for a while now and that position has been exaggerated by the current lockdown regulations and the fact that they haven’t been able to operate at full capacity.”

In the video below, trade union Solidarity expresses concern over Denel’s inability to pay salaries.