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Does the department intends to assist a certain company (name furnished) to take advantage of potential government-related fleet procurement offset prospects with specific reference to the requirements of the SA Air Force, SAA and SA Express Airways

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Does the department intends to assist a certain company (name furnished) to take advantage of potential government-related fleet procurement offset prospects with specific reference to the requirements of the SA Air Force, SAA and SA Express Airways
03/08/2012

Question for oral reply

Question no.: 151

Date of publication: 03 August 2012
151. Dr G W Koornhof (ANC) to ask the Minister of Public Enterprises:
Whether his department intends to assist a certain company (name furnished) to take advantage of potential government-related fleet procurement offset prospects with specific reference to the requirements of the (a) SA Air Force, (b) SA Airways and (c) SA Express Airways; if not, what is the position in this regard; if so, what are the strategic economic and social benefits that will accrue to the country through government investment in the aerospace sector?    NO2394E
Reply:

(a-c) The Denel entity that benefits from offset obligations resulting from aircraft procurement by State entities and agencies is Denel Aerostructures. Denel Aerostuctures uses high technology and manufacturing capabilities to design, produce and assemble complex metal and composite aircraft structures (aerostructures). 

Denel Aerostructures has established itself as a competitive design and development house for complex aerostructures such as Wing to Fuselage Fairing. Any new offset obligations provide the company with the opportunity to leverage its proven capabilities for more sustained work packages with more global original equipment manufacturers (OEMs). As a Tier 1 supplier to OEMs, Denel Aerostructures is able to crowd in the participation and certification of the local aerospace and manufacturing sectors in the execution of work packages. This would in the long term allow for the localization of certain capabilities by domestic companies which could then supply directly to these OEMs. Therefore, the Department will ensure that Denel is given all the necessary support required to access additional work packages in those areas where it has the necessary capacity to deliver competitively.
  
Aerospace is one of the sectors that generates industrial technology and the development of high end technical skills necessary to drive economic development. 

Denel Aerostructures, as the largest aerostructures company is South Africa, is strategically positioned to be one of the key drivers of Government’s Industrial Development and advanced manufacturing policies and strategies. The strategic economic benefits from the investment in the aerospace sector is that it will assist local aerospace companies, like Denel Aerostructures, to be imbedded in the supply chains of global aerospace original equipment manufacturers (OEMs). The  strategic and repeat aircraft fleet procurements enables Denel Aerostructures as a Tier 1 supplier to global OEM to draw in the participation of the local aerospace and manufacturing sectors, thus fulfilling the policy objectives of government  of building the manufacturing sector through localization. 

The Department of Trade and Industry (DTI) through the National Industrial Participation Programme (NIPP) and Armscor through the Defence Industrial Participation Programme (DIPP) direct and monitor the fulfillment of offset obligations. Denel Aerostructures is not the only beneficiary of offset obligations that will flow from the fleet procurements by the aforementioned state companies and institutions. Local aerospace companies in the private sector benefitted in the past and stand to benefit from the anticipated procurements. 

The DTI is in the process of forging aerospace sector-specific development plans with the aim to ensure that the offset obligations are directed to those niche areas in which the local industry could reasonably establish some level of global competitiveness. These measures by the DTI will give the Government localization strategy added influence with regard to the local aerospace sector.

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