Review of White Paper on the Defence Related Industries

1. Review of White Paper on the Defence Related Industries PCD 19 August 03

2. Origins of the White Paper on the DRI • Origins of the White Paper • Transitional Executive Council Act provided the legal framework for discussion on broad defence matters. • JMCC deliberations took place and work was commission into the future of the arms and related industries. • Committee of Ministers was appointed, led by Minister of Defence, who formulated a comprehensive framework for the underlying philosophy, policy and approach with regard to various aspects of the arms related industry.

3. White Paper on Defence and Defence review addressed broad issues of arms control and defence industry, and the Defence review addressed the acquisition process of the DOD in greater detail. • NCACC tasked by Cabinet to initiate and prepare a White Paper on the Defence industry.

4. Process Matters • Ownership of the White Paper • NCACC • Cabinet Approved on 01 Dec 1999. • Key Government Stakeholders • DTI • DST • DPE • DOD

5. Steering Committee • Defence Secretariat (Mr Shaikh - Chief of Acquisition, also the chair) • Department of Trade and Industry (Mr Hirsch). • Armscor (Dr Buys). • Denel (Mr Potgieter). • South African Aerospace, Maritime and Defence Industries Association (AMD) (Maj Gen Rtd. Kriel). • Human Sciences Research Council (HSRC) (Mr Mojale). • Council for Scientific and Industrial Research (CSIR) (Mr Anderson). • UCT Center for Conflict Resolution (CCR) (Mr Nathan). • University of the Witwatersrand’s Graduate School of Public and Development Management (Prof Cawthra).

6. Points of Departure • Defining the Industry • South Africa is the first country to coin the term “defence-related industry” and to do away with the term “defence industry” • The ‘defence industry’ could not be identified or defined as a distinct industrial sector. Defence work is done across all sectors of the South African industrial base. • Growing tendency for companies producing defence equipment to make use of civilian technologies, or to manufacture dual-use products which can be sold to both defence and non-defence markets. • Increasing overlap between defence and civilian production within companies.

7. Significance of the White Paper • The White Paper is a significant document in that it was based on exhaustive research of an industry that was not previously exposed to public scrutiny. Attempts to contextualise the policy debates. • Provided both background information on the industry and a coherent policy for the industry.

8. Synopsis of the White Paper • Chapter 1 • Provides a comprehensive analysis of the South African economic, industrial and technology policy at that time. • Chapter 2 • Condensed history of the industry • Comprehensive analysis of the earnings, value and employment levels of the industry. • Allows for analysis of the economic value of the industry. • Chapter 3 • Following from the Defence Review, describes DOD acquisition process and technology process.

9. Chapter 4 • Identifies strategic technologies and capabilities for the Defence Force. They are by nature few in number and well defined, mapping a long term technology master plan for defence that is firmly located in the progressive position adopted by the White Paper on Technology. • Accepts that normal market forces will apply to the defence-related industry and will determine entries and exits to the defence market. • Those few and specific technologies that are strategic to the Defence Force will however not be exposed to market forces and limited protectionism will occur. • Subsidisation of the industry is not envisaged. • The shortcoming to date is the interface between the Defence Review and this White Paper. The deviation in the categorisation of strategic and non-strategic technologies and capabilities from the Defence Review to this White Paper is problematic.

10. Chapter 5 • Addresses government support measures. • Acknowledges that weapon systems are essentially sold on a government to government basis. • Identifies major government role players who assist the defence-related industry in marketing products: Departments of Defence, Foreign Affairs, Trade and Industry, the South African Secret Service and Armscor. • The chapter calls into existence a Marketing Support Board which functions to co-ordinate government effort.

11. Chapter 6 • Reviews those international arms control treaties and regimes to whom South Africa is a signatory, and which control the transfer of arms and certain technologies. These range from conventional arms controls to nuclear, chemical and biological controls. • Review of South Africa's international obligations conceptualises further discussion on domestic arms control legislation and structures impacting on the defence-related industry. • Seven different sets of legislation are reviewed (Conventional Arms, Armaments Production and Development, Non-Proliferation of Weapons of Mass Destruction, Firearms and Ammunition, Teargas, Explosives and Nuclear Energy). • Five control structures are reviewed (the NCACC, the Non-Proliferation Council, the Explosives Inspectorate, the Central Firearms Register and the Atomic Energy Corporation). • The chapter notes the absence of legislation and statutory control structures for conventional arms and requires the investigation of legislation and structures.

12. Chapter 7 • Addresses specific social and economic challenges facing the industry, providing government with options on how these may be addressed. • Within the context of globalisation and the internationalisation of the defence market, the chapter investigates how the defence-related industry might deal with issues of consolidation and the establishment of both joint ventures and equity partnerships. • Within the context of the transformation of South African society, the chapter expresses itself on issues such as affirmative procurement, equity ownership amongst previously disadvantaged groups, as well as facilitating new entrants to the market. • Broad transformation issues are also touched on, such as labour related legislation in South Africa.

13. Outcomes of the White Paper • Legislation • National Conventional Arms Control Act. • Formalises conventional arms control processes. • Creates the NCACC as a statutory body. • Came into force in 2003.

14. Armscor Bill. • Shift of the production capabilities of Armscor to Denel in 1992. • Shift in Arms Control responsibility to the NCACC in 1995. • Establishment of the Defence Secretariat in 1995 with a dedicated defence acquisition division. • ‘White Paper on the Defence-Related Industry’ called for a review of the Armaments Development a Production Act. Armscor to be established as the Acquisition agent of the DOD. • Meet the defence materiel requirements of the Department. • Meet the defence technology, research, development, analysis, test and evaluation requirements of the Department. • Emphasis is placed on efficiency, effectiveness and economy, as well as legality, fairness and transparency.

15. Prohibition of Anti-Personnel Mines Bill. • Signed & ratified Convention on the Prohibition of the Use, Stockpiling, Production and Transfer of Anti-Personnel Mines and their Destruction. • Article 9: "Each State Party to the Treaty shall take all appropriate legal, administrative and other measures, including the imposition of penal sanctions, to prevent and suppress any activity prohibited by a State Party under the Convention undertaken by persons or on territory under its jurisdiction". • The Prohibition of Anti-Personnel Mines Bill brings the Convention into South African Law.

16. Prohibition or Restriction of Certain Conventional Weapons Bill. • Signed & ratified Certain Conventional Weapons Convention (CCW). • Article 14(1)&(2) of Protocol II of the Certain Conventional Weapons Convention requires each High Contracting Party to take all legal, administrative and other measures, including penal sanctions to prevent or suppress any activity prohibited by the Protocol. • The Certain Conventional Weapons Convention requires High Contracting Parties to initiate a number of other steps in addition to the enabling legislation identified above. • Article 6 of the Convention requires that comprehensive instructions on the Convention must be disseminated to the Armed Forces. • Article 14(3) of Protocol II requires that armed forces receive instruction on the Protocol and Operating Procedures are promulgated. • The ‘Prohibition or Restriction of Certain Conventional Weapons Bill’ is being finalised within the Department of Defence.

17. Structures • Creation of the Marketing Support Board • Further development into the SADESO • Initiated the Cluster vs. Sector Debate.

18. Areas of Possible Amendment Chapter 1 • Deals with the National Policy Framework. • Could be updated to reflect South Africa’s policy developments in terms of industrial, economic, scientific and technology policy. • Chapter 2 • Provides an economic overview of the defence-related industry, is very outdated. • Since the introduction of the Strategic Defence Packages, the size, shape and organisation of the defence-related industry has changed significantly.

19. Chapter 3 and Chapter 4 • Deals with acquisition and technology management structures, which have not changed significantly. • Chapter 4 however, which deals with strategically essential technologies and capabilities, does require updating. • This chapter should be informed by three new developments, namely: the Military Strategy, the Force Employment Strategy, and the Technology Strategy currently being developed with the Department of Science and Technology. • Chapter 5 and Chapter 6 • Chapter 5, dealing with marketing facilitation, should be updated to reflect the new SEDESO approach. • Chapter 6, dealing with arms control structures, should be updated to reflect recent developments. • Chapter 7 • Deals with ancillary matters to the industry, needs a general update to reflect current developments.

20. QUESTIONS?

21. Executive Summary of Briefing • Origins of the White Paper • Transitional Executive Council Act. • JMCC Deliberations. • Committee of Ministers led by Minister of Defence. • NCACC tasked by Cabinet. • Ownership of the White Paper • NCACC • Cabinet Approved on 01 Dec 1999. • Key Government Stakeholders • DTI • DST • DPE • DOD

22. Synopsis of the White Paper • Chapter 1 – National policy framework. • Chapter 2 – Economic analysis of the DRI. • Chapter 3 – Defence acquisition process. • Chapter 4 – Defence technology management and identification of strategic defence technologies and capabilities. • Chapter 5 – Marketing support to the DRI • Chapter 6 – Arms control regimes in South Africa. (Nuclear, Weapons of Mass Destruction, Dual-Use, Conventional Arms, Firearms and Ammunition, Teargas, Explosives). • Chapter 7 – Challenges to the industry (globalisation, foreign entrance, equity partnerships, joint ventures, BEE, Affirmative procurement etc.).

23. Activities initiated by the White Paper on DRI • Legislation • National Conventional Arms Control Act. • Armscor Bill. • Prohibition of Anti-Personnel Mines Bill. • Prohibition or Restriction of Certain Conventional Weapons Bill. • Structures • Marketing Support Board • SADESO • Cluster vs. Sector Debate. • Areas that can be updated • Chapter 1 – Update national policy framework • Chapter 2 – Complete economic analysis of size & shape of the DRI post the SDP’s • Chapter 3 – Include the new acquisition policy • Chapter 4 – Agreed on DOD strategic technology strategy. • Chapter 5 – Include SEDESO developments • Chapter 6 – Update of SA arms control regimes.