INTRODUCTION

Assessing possibilities for co-operation in sub-Saharan Africa with regard to defence equipment cannot be done without taking the world order in general into account. When the "New World Order" was announced by George Bush in 1991, it was already clear that this order created a great deal more uncertainty than the one that applied during the Cold War, when nuclear parity and the conventional military balance between East and West were responsible for "stability".

These new uncertainties can be traced back to three particular causes: rapid democratisation in societies traditionally resistant to democracy; economic liberalisation, often accompanied with high costs and disruption; and, resulting from the above, the development of new areas of conflict in regions which had formerly been stable. These areas included ethno-nationalistic conflict and economic disruption, contributing to the refugee problem and problems experienced with structural adjustment programmes. There is already talk these days of a "post-New World Order".2

The debate on the "newest order" in the post-Thatcher/Reagan/Bush world has already begun. Global transformation is accentuated by the disappearance of the East bloc and the greater crises facing the South. The inequality between North and South is one of the newly defined problems and debates on dependency and marginalisation are central to this.

The processes of global transformation were set in motion simultaneously with large-scale changes within South Africa after the abolishment of apartheid, the end of regional destabilisation and the fall of Communism in Eastern Europe. South Africa is engaged in rejoining a world changed into a "North-South world", replacing the East-West dispensation of the past.

Questions about South Africa’s role and place in this new world into which a "new" South Africa has only recently been fully integrated, need to be asked. Furthermore, the country’s relations with the North and the South, and in particular with other African states on the southern subcontinent should also be reassessed.

These issues will be explored with special emphasis on defence equipment co-operation in sub-Saharan Africa. It is argued that such co-operation should take place within the limits set by international and national laws and conventions and bilateral and multilateral agreements, which would of necessity be determined by a variety of imperatives and determinants.

SUB-SAHARAN AFRICA AND GLOBAL POLICIES

Since the end of the Cold War the appearance of "new conflicts" has become part of the patterns of global transformation. The UN Security Council, often under pressure from the United States of America, has attempted to stabilise these conflicts through, amongst others, international peace forces aiming at making and maintaining peace. However, the USA in particular wants to limit militarisation world-wide. In this respect, the International Monetary Fund (IMF) and the World Bank act as powerful monitors.

During the 1991 World Bank Annual General Conference on Development Economics, Mr Robert McNamara, former President of the World Bank and a former US Defence Secretary, made a plea for the "linking of financial assistance, through ‘conditionality’, to movement towards ‘optimal levels’ of military expenditure". He indicated that states that spend more than two per cent of their Gross National Product (GNP) or about eight per cent of their state expenditure on military expenses may not receive further development aid. The intention is clearly to force such states to change their priorities to social and economic issues. It is also in accordance with the IMF guideline to reduce excessive state expenditure. The pattern has become clear: the North will not permit arms expansion in the South. This applies to everyone, including South Africa and India, which is bad news for the South African defence industry, unless the growth of the country’s GNP improves, and/or South frica can reach a special understanding with the IMF and the USA.

As in the rest of the world, sub-Saharan Africa continues to be plagued by conflict and instability. But there is an increased sense amongst Africans that their problems are considered to be less serious than those elsewhere in the world. While the UN has devoted some attention to problems in Angola, Mozambique, Rwanda and Somalia, peace-keeping efforts have not resulted in fruitful conflict resolution. At the time of writing the civil war in Angola was continuing unabated, yet the UN peace-keeping force had been reduced to less than hundred military and police observers, whose efforts were severely hampered by renewed fighting.

There is also a positive side. The general state of the African economy implies that there are no funds available for arms purchases, and, as a result of international changes, free or subsidised arms are no longer handed out. Furthermore, a number of African countries have taken part in UN peace-keeping operations for the first time. Botswana has contributed troops to both ONUMOZ and UNOSOM; Zambia and Cape Verde contribute to ONUMOZ, and Namibia and Cameroon to UNTAC. Nigeria has provided contingents for UNTAC, UNOSOM and UNPROFORT (Croatia).

POTENTIAL REGIONAL INTERACTION

The areas of potential regional interaction cannot be considered unless the insecurities that are present have been addressed. The end of apartheid does not necessarily remove insecurity in the region. It is desirable for South Africa, despite its overburdened domestic agenda, to engage the region, given that its development and security are inextricably linked to the affairs of Africa.

In the past South Africa followed a policy of aiding neighbouring territories under white rule, as well as those black governments well-disposed to its internal policies. This was not effective in formalising politically advantageous co-operative schemes nor favoured the acceptance of South African leadership in Africa. Yet, even during the Botha years, and at a time of regional conflict, South Africa still maintained economic and trading relations with the region, despite the lack of formal agreements.

Integration and Co-operation in the Region

In recent years there is a new focus on regional rationalisation. In 1980 a number of African states established the Southern African Development Co-ordination Conference (SADCC) in an attempt to reduce the region’s economic dependence on South Africa by acting as a conduit and a co-ordinating centre for international aid and investment. SADCC has recently changed its name to the Southern African Development Community (SADC). However, SADC did not succeed in reducing economic dependency on South Africa. Trade with South Africa increased while donor aid accounted for 86 per cent of all income. The Preferential Trade Agreement for Eastern and Southern Africa (PTA) was established in 1981. It has a different portfolio of members and the aims and objectives of the PTA overlaps with that of the SADC. This requires that organisations, whether they include South Africa or not, integrate and co-operate even further rendering certain structures superfluous. The question is: which of them will succumb and how will this happen? South Africa has now joined the SADC. A merger could be considered between the SADC and the PTA, transforming it into COMESA, and changing it into the Southern African Free Trade Area, instead of a Preferential Trade Area. This could be advantageous for South African trade, but be detrimental to production in the wider region.

The markets in many of these countries will have to protect their industries against South African competition by introducing protectionism. As an economic entity, South Africa is much stronger and thus in an unequal relationship with other countries. An Afromarket without protectionism against the outside world and South Africa, thus will not be in Africa’s best interests. South Africa’s superior production capabilities and technological knowledge could easily lead to market domination, thereby de-industrialising many of the states in the future Afromarket.

Whether the emphasis should rather be on functional, sectoral, bilateral or multilateral co-operation, it is clear that a kind of collective regional bargaining with the rest of the globe is also necessary. In addition it might be useful to discuss these issues with the multinational corporations concerned. If such negotiations include an environmental code or a social charter formulated in conjunction with trade unions, the implications can be far-reaching. The possibility have been raised that some of the "sub-imperialist states" such as Mexico, Brazil and South Africa could take the lead in North-South bargaining. Whichever way, the leadership of a Third World coalition must be decided by its own "hegemonic" structures, which in turn implies existing regional leadership and national self-sufficiency and power as a necessary starting point.

The above emphasises the trend towards bilaterality that presently characterises new relations between Northern states. The most important opportunities for multinational bargaining in Southern Africa, however, lie in the sphere of "meta power",3 where the new rules of the game that would guarantee the best results, apply.

From Skunk to Chameleon

Regional integration and co-operation are not negotiable: South Africa cannot separate itself from Africa. It is the country’s natural market. Existing bilateral links need to be retained and new multilateral ties that will continue to strengthen the region, should be investigated. Specific links with the North remain inevitable and desirable. South Africa must not make a choice between North and South, but must establish links with both. As such, it should exercise typical "chameleon politics ... determined by careful economic calculation".4

PERSPECTIVES ON THE SOUTH AFRICAN DEFENCE INDUSTRY

South Africa is one of approximately fifty industrialised countries with a domestic defence industry. These countries supply their own armed forces with military equipment and export to other countries. In relative terms, South Africa is one of the smallest defence equipment exporters with exports amounting to less than half a per cent of the total global defence trade. The development and manufacture of defence equipment in South Africa are conducted by the commercial industrial sector. It comprises approximately 900 private and public companies involved in defence production in addition to their civilian business.

The democratisation of South African politics and the restructuring of South African defence organisations must be accompanied by the development of a new South African arms trade policy. Reasons for this are linked both to domestic security and state finance, but also to the international political and economic goals which South Africa can be expected to pursue in the foreseeable future.

The Case for a Local Arms Industry

Why does South Africa, or for that matter any country, need a local armaments industry? The morality of a society retaining an arms industry is based on the morality of retaining a defence force, which in turn is based on the morality of that society collectively defending itself against violent aggression.

South Africa’s improved regional security environment, its changing security needs and objectives, and the shifts in government spending priorities have had a dramatic effect on defence spending in the last few years. Calculated as a percentage of total government expenditure, the defence budget has decreased from 15,7 per cent in 1989 to 8,2 per cent in 1993; while defence spending as a percentage of GNP has decreased from 4,3 per cent in 1989 to 2,6 per cent in 1993.

These cuts have had a profound effect on the local defence industry. Turnover has plummeted by sixty per cent and 65 000 jobs in the public and private sector have been lost. The survival of the industry is at stake. Consequently, the government and Armscor have intervened and established a Technology and Industry Survival Plan fund. The industry responded in one or more of the following ways: retrench employees, reduce Research and Development spending, cut capital spending on new technology and plant equipment, cut the supplier base, reduce output, rationalise or consolidate production activities, increase arms exports, diversify and/or convert production activities.

In the public sector, Denel was created in 1992 with hundred per cent of its equity owned by the state. According to Denel’s managing director it has earned foreign exchange in excess of R1 billion over the past five years, and it plans to double profits during the next three years to R500 million. For every R1 million worth of products sold, 20 new jobs are created.5

The defence establishment argues that the retention of a defence industry, albeit at lower levels of production, is justified from a military-strategic, socio-economic and military-operational perspective.6 These perspectives link the needs of national and regional security with socio-economic aspects, such as sources of employment and technology.

From an economic point of view, defence cuts often include "adjustment costs". These are normally seen in terms of jobs lost, threats to the livelihood of defence-dependent communities and the loss of valuable expertise, skills and technological capabilities.7 From a defence establishment point of view, these losses are catastrophic. However, in the current transition period it is increasingly difficult to justify spending large amounts of public resources on defence, when there are other priorities such as education, health and housing.

Given the need for further defence cuts, it is suggested that an integrated approach could be adopted as a strategy to deal with the problems of defence-industrial adjustment. These synthesised compromises, both on a national and regional level, would involve developing a broad-based industrial strategy, that is driven by national needs and aimed at developing and strengthening the country’s civilian industrial base.

Arms Trade

The argument for the continuation of the South African arms trade is essentially economic. Trade in South African weaponry represents a significant foreign currency earner. Exports of defence equipment amounted to R886 million in the 1993/94 financial year. The regional distribution of export permits issued for 1992/93 is shown in the following table:

Judicious arms sales can prove valuable both economically and politically in the sphere of foreign relations. Especially in Africa, South African weapon sales may expand South African influence across the continent. This may also benefit African states in their search to lessen their dependence upon non-African supply sources, moving away from North American and European suppliers to South Africa. Money spent would remain in Africa.

Arms transfers and sales may support regional security arrangements. However, the poverty of a number of South Africa’s neighbours may force the government to transfer or barter rather than sell weaponry. It will be easier to establish and administer maintenance and upgrade facilities. Moreover, there are few weapons more compatible with African conditions than those developed by the South African arms industry.8

It can be expected that the United States and Europe will try to insist that South Africa withdraw from the arms trade. Fortunately, there will always be more important considerations for the industrialised states to focus upon, than small arms trading by a developing nation. On the international market, South Africa will not represent a major challenge to the market share of these states. It should be born in mind, however, that it is ultimately in the interest of international defence establishments to push competitors out of their markets, no matter how small they are.

These threats need not be taken too seriously, provided that South Africa’s sales policies remain controlled, responsible and sensitive to US, European and multilateral security concerns. A major task facing South African policy makers (including the Ministry of Defence) is that of maximising the international legitimacy of South Africa’s arms trade policies.

In most individual countries world-wide, the arms trade is controlled by legislation, as well as by international agreements and treaties. With its adherence to various international treaties such as the Nuclear Non-Proliferation Treaty, the Chemical Warfare Convention, the Bacteriological Warfare Convention, the Missile Technology Control Regime, which South Africa plans to sign this year, and the approval of acts such as the Non-Proliferation of Weapons of Mass Destruction Act, South Africa has formally stepped in line with the rest of the world.9

Cole Porter said, "National prosperity is created, not inherited". This quotation may well have been made in reference to the South African defence industry. An association has recently been formed that will enable the individual members of the industry to speak with one voice. Known as the South African Defence Industry Association (SADIA), its mission is to promote the development of an economically viable and internationally competitive defence industry in South Africa. As background to its formation, the Association has stated that it aims to ensure a greater contribution to economic growth and social upliftment in South Africa, thus adding to peace and prosperity for all. Its immediate objectives are to promote communication among those parties involved in the development, manufacture and marketing of arms and to uphold a code of conduct for the SA Defence industry. It intends to interact with government and government agencies, the media, other interest groups and industries.

The international legitimisation of South Africa’s arms trade cannot only involve limitations on the types of weaponry supplied, but will also limit the types of clientele. This will partly be determined by the security interests of the country and its general foreign policy orientation. Restrictions on arms transfers will also have to abide by UN arms sanction resolutions.

In October 1991 the UN Security Council provided its Guidelines for Conventional Arms Transfers. These suggest that decisions on arms sales must take into account whether the proposed transfer will promote the capabilities of a recipient to meet its legitimate self-defence needs, whether it will serve as an appropriate and proportional response to the security and military threats confronting the recipient country, and whether it will enhance the capability of the recipient to participate in regional or other collective arrangements consistent with the UN Charter. The Group of Five agreed to avoid transfers which would serve to

prolong or aggravate existing conflict;



increase tension in a region or contribute to regional instability;



introduce destabilising military technologies into a region;



contravene embargoes and other internationally agreed restraints used for other needs than legitimate defence and security;



support international terrorism;



interfere with the internal affairs of sovereign states; and



undermine the recipient state’s economy.10

These guidelines are useful for South African policy makers when assessing possible sales. In the final analysis, the arms trade forms part of international relations. A new arms trade policy will involve a host of complex foreign policy, political, legislative and economic decisions aimed at safeguarding international security concerns in a manner that ensures continued accountability at the highest levels of decision-making and proper administrative practices. The Secretariat of Defence hopes to play an important role in this regard.

Diversification and Conversion in the South African Arms Industry

There is still vast potential for further diversification in the arms industry. Yet, many overseas companies failed in their attempts at diversification and South African companies would be wise to study the reasons for these failures. The most important change in attitude should involve a cultural adaptation. After years of selling only to the military, a culture has been created that prizes technical prowess above cost. The arms industry is also accustomed to developing and producing weapons according to detailed user requirements, rather than to taking risks with innovative designs.

While it is often difficult to convert technology directly into products suitable for civilian use, the process can create a ripple effect throughout a variety of industries.

High Added Value and Income

The defence industry typically deals with high added value and high income products. This increases the potential for commercially viable ventures on international markets which in turn provides the opportunity for technology exchange, joint ventures and an on-going process of renewal. If the industry wants to maintain a competitive edge, such exchanges are essential. Investment in technology development has to continue if the advantage is to be maintained.

The South African Defence Industry Association sees this as one of its main challenges and believes that a technologically advanced and innovative South Africa can be of great value to the whole of the Southern Africa.

Research and development in the defence industry could become self supporting by increasing exports of defence equipment. The establishment of joint ventures would be of particular value in this regard. Joint ventures provide capital to renew technology, develop people-based skills and create new or adapted products. They should focus on procuring key technologies that provide the country both with a competitive advantage in a global context and strategic local capabilities. Key technologies are those that have a proven capability to change the nature of competition in a specific market or product.

In an objective local survey of seventy manufacturing organisations from different industries, Deloitte & Touche Tohmatsu International recognised the following Critical Success Factors as those that will distinguish world class companies to be internationally competitive, from those that are not.

Quality

Cost

Technological leadership

Global capabilities

Customer service

Flexibility

It is clear that to become and remain internationally competitive, the focus should be on global capabilities and technological leadership. SADIA intends to concentrate on these areas in its efforts to position its members as leaders.

Counter Trade

Counter trade is a relatively new concept in South Africa. It requires an exporter of products to a particular country to import goods from, transfer technology to, or invest in that same country, The defence industry, as a pioneer in the application of this form of international trade, has thus provided economic benefits to various sectors in the South African economy. With counter trade becoming an increasingly important feature of international military projects, the defence industry is well positioned to capitalise on this trend. It can provide a stimulus for other industries, with positive results such as job creation, infusion of new technology and access to new international markets.

Defence Industrial Conversion

There is a growing lobby that suggests that if the conversion of the defence industry is properly managed, it can present several opportunities for economic growth, while at the same time providing an important lever to gear production and economic priorities towards national needs.

Conversion is commonly understood as "the transformation of military resources into civil activities and production". Conversion is not a new phenomenon and in fact many countries, including South Africa, converted civilian factories into military ones, and vice versa during and after the Second World War. However, in recent years military and civilian production have diverged to such an extent that conversion is often seen as a costly and difficult defence-industrial adjustment strategy to pursue, given the difficulty experienced by firms, communities and defence workers in adjusting to lower levels of defence spending.11

onversion introduces additional business risks and in view of the present recession and lack of business confidence prevailing in South Africa, it is unlikely that private enterprise will embark on this in a major way. It is safer to eliminate excessive capacity by retrenching personnel and closing facilities. State support seems necessary to enable the arms industry to convert. This also seems to be the pattern in other arms-producing countries: President Clinton proposed spending $1,7 billion in 1993 ($20 billion over five years) in aid of workers, communities and industries hardest hit by defence cuts. The number of Russian defence plants undergoing conversion increased from 360 to 460 in 1991, and current forecasts indicate that at least sixty per cent of Russian defence enterprises are to go through the same process. The Chinese government supported 1 195 conversion projects with a total investment of three billion Yuan over five years (1986 - 1990).

Four major approaches have been identified by Bachelor in an attempt to classify theoretical approaches to conversion:

Macro-economic conversion, where the government, using appropriate macro-economic policy instruments, will optimally reinvest the released resources in the civil sector.



Micro-economic conversion which includes diversification, whereby the company does not necessarily halt defence production.



Community-based conversion where policy instruments such as training schemes, technology transfers and venture capital grants are adopted.



Political conversion which includes demilitarisation and disarmament measures, but is also concerned with broader socio-political and economic issues. Central to this approach is the argument that the defence industries base in many countries ‘colonise’ scarce resources, technology and skills to the detriment of other sectors of the economy.

Recent conversion efforts of the local arms industry have tended to be of a fairly limited nature, and have followed the micro-economic approach, namely diversification. The macro-economic, community-based or political approaches have not been attempted in South Africa.

CONCLUSIONS

The imperatives for defining co-operation in the field of defence equipment are both varied and interrelated. Such co-operation should however, have the following characteristics. It should contribute to greater national and regional stability and limit world-wide militarisation. It should support existing priorities of state expenditure and respect conditionalities of international financial assistance. It should be linked to existing and emerging multilateral agreements. It should not imply a choice between co-operation with either North or South, but in true chameleon style, should allow co-operation with both as the need arises.

In the process of international collective bargaining, it would benefit South Africa to accept its implicit role as leader in Southern Africa in particular, in sub-Saharan Africa and in the South hemisphere as a whole.

It is apparent that there are various models to pursue with regard to rationalisation and co-operation in sub-Saharan Africa. Some observers believe that the emphasis should be on functional and sectional co-operation and especially emphasise bilateral co-operation. However, this is not suitable for collective regional bargaining with the outside world. Others propose the principle of mergers between the various sets of co-operative organisations described above. The subsequent formation of a Southern African Free Trade Area could have advantages for South African trade, while having a detrimental impact on production in the wider region. A third alternative emphasises regional co-operation on a more multilateral basis. This model supports a market which must gradually develop from a free trade area to an economic community and single market. The choice is bound to be a compromise, with the emphasis on bilateral agreements and simultaneous collective regional bargaining, led by the natural leaders in the region.

The future of the South African arms industry should preferably be linked to the broader base of the South African macro-industry as a whole. The potential for further diversification of the arms industry should be exploited.

In view of economic, political and social imperatives, the planned conversion of surplus capacity in the defence industry to civil activities and production must be supported. In this regard macro-economics and political conversions, utilising appropriate policy instruments, could lead to optimal reinvestment of those resources in the civil sector.

The priorities of sub-Saharan Africa are similar to that of South Africa. The sub-continent must attempt to be less dependent on donor finance and should set up bilateral and multilateral programmes and mechanisms to address its own weaknesses. Apart from the instability caused by ethnic conflict and other disasters, it is disconcerting that Africa only presents two per cent of the total world economy. It is thus a top priority for Africa to become much more productive and self-sufficient. Spending more on defence equipment will not contribute towards greater stability in the region.

At present, seventeen African countries provide contingents for the "Blue Helmets" (UN missions). However, African governments are not in control of interventions taking place on the continent. The implementation of an effective inter-African security structure has hardly progressed since 1963 (the first coup d’etat that took place after the departure of colonists: Togo, January 1963). The time has come for Africa to substitute guns and arms with butter and ploughshares.

However, any country has an undeniable right and duty to defend and arm themselves. A strong case can be made for retaining and developing a diversified arms industry. In future, such an industry can serve the defence needs of sub-Saharan Africa in general and South Africa in particular. Whilst concentrating on utilising the arms industry for defence needs, it would also contribute towards the development of the national economy on the one hand, and the development of the region as a whole, on the other.

Government, industry and labour should combine forces in developing and implementing an industrial strategy by:

creating synergy and ‘technology overlaps’ within and between the defence sector and other non-defence sectors of the economy;



formulating a national science and technology policy, which would identify the country’s scientific/technological priorities, and provide a mechanism for selecting critical industries and technologies that would receive government sponsored research and development funding and other forms of assistance; and



sharing the responsibility and associated cost burden of structural adjustments in the industry on a co-ordinated basis.

There is no reason why South Africa should not be allowed to pursue its own legitimate economic and political interests as it sees fit. At the same time, Government must ensure that South Africa is not out of line with international trends towards arms control and must continue to make visible efforts to demonstrate its commitment in this regard. In this way, the South African arms industry can also be of service to sub-Saharan Africa as a whole.

__________

Edited version of a paper presented at the Seminar on Defence Equipment Co-operation in Sub-Saharan Africa, Johannesburg, 21 November 1994.



Willie Breytenbach, Bargaining in North-South Politics: Policy Options for a "New South Africa, Research Report No 1 of 1994, Centre for International and Comparative Politics, University of Stellenbosch, 1994.



Stephen D. Krasner, Power vs Wealth in North - South Economic Relations, in Robert J. Art and Robert Jervis (eds), International Politics: Enduring Concepts and Contemporary Issues, Harper Collins, New York, 1992.



Frost in Breytenbach, op. cit.



Esther Waugh, Denel outlines RDP drive, The Star, 25 October 1994.



André Buys, The Future of the South African Armaments Industry, South African Defence Review 7, 1992.



Peter Bachelor, Conversion of the South African Arms Industry: Prospects and Problems (Undated).



Martin Navias, Towards a New South African Army Trade Policy, South African Defence Review 13, 1994.



Fred Boshoff, Facilitating Arms Exports: A Streamliner Permit System, Salvo, 1994.



Navias, op. cit.



Bachelor, op. cit.