When Denel SOC was inducted into the Top 100 Global Defence Companies hall of fame in 2015, no one could have predicted that the company would work its way up from the 97th to the 84th position within two years. The climb up to this position has been as a result of relentless efforts by the group claiming market-share in the highly competitive global defence market.
It was the gradual decline on local defence spend in recent years that forced Denel to look to global markets if the company was to survive into the future as a business. Local defence spend currently sits at less than 1.3% of GDP, compared to international benchmarks of 2 to 5%.
For Denel’s commercial mandate to be sustained into the future there is no other way but to look beyond the borders of our country. Our business strategy was thus designed at the back of a decline in the local market.
In pursuing this strategy, we identified critical international markets that would be key to Denel’s growth; and this included the Asia Pacific market. This market continues to be a focus area for Denel because of its demand for defence equipment which has seen year-on-year increases in spending - in excess of 20% - making it one of the top spending regions on defence equipment in the world.
It was therefore in search of opportunities in this market that Denel established a Joint Venture (JV) company with VR Laser Asia in 2016. It is our view that this business case was done in compliance with all legislative governance processes. The business case that was submitted in 2015 to both departments – i.e. Public Enterprises and National Treasury - remains valid and relevant.
Since its establishment, Denel Asia has not traded due to differences of opinion with National Treasury, which have been widely covered in the media, at times based on perceptions and not fact. The Denel Asia JV became the focus of negative attention from the media to the detriment of the Denel brand, both locally and internationally.
Denel also conducted continuous assessments of the untenable atmosphere caused by the establishment of this JV; and took a resolution to exit the Denel Asia JV and explore alternative marketing approaches to access the Asia Pacific market.
This therefore brings us to a point where we can officially report that Denel SOC has ended its involvement in the Denel Asia JV. We have exited the JV.
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