Deputy Speaker, the Denel entity that benefits from offset obligations resulting from aircraft procurement by state entities and agencies is Denel Aerostructures. It uses high technology and manufacturing capabilities to design, produce and assemble complex metal and composite aircraft structures. 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.
As a Tier 1 supplier to original equipment manufacturers, 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 localisation of certain capabilities by domestic companies which could then supply them 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 generate industrial technology and the development of high end technical skills necessary to drive economic development. Denel Aerostructures is the largest aerostructures company in South Africa. It is strategically positioned to be one of the key drivers of the government's industrial development and advance manufacturing policies and strategies. The strategic economic benefit from the investment in the aerospace sector is that it will assist local aerospace companies such as Denel Aerostructures to be imbedded in the supply chains of global aerospace original equipment manufacturers.
The strategic and repeat aircraft fleet procurements enable Denel Aerostructures as a Tier 1 supplier of global OEMs to draw in the participation of the local aerospace and manufacturing sectors and thus fulfil the policy objectives of government of building the manufacturing sector through localisation.
The Department of Trade and Industry, through the National Industrial Participation Programme, and the Armaments Corporation of South Africa, Armscor, through the Defence Industrial Participation Programme, direct and monitor the fulfilment 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 benefited in the past and stand to benefit from the anticipated procurements.
The Department of Trade and Industry is in the process of forging aerospace sector-specific development plans with the aim of ensuring 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 Department of Trade and Industry will give the government localisation strategy added influence with regard to the local aerospace sector. Thank you.
Deputy Speaker, arising out of the hon Minister's reply, I welcome the statement that we will put emphasis on localisation and that work packages will be secured as far as possible, as well as the aerospace development plan. I think it is positive for the country, because it is of strategic and national importance that we go that route.
My follow-up question deals with the national fleet procurement demands, and that includes the renewing of the jet and turbo fleet of SA Express; it includes the new aircraft for SA Airways, SAA, and a search for a new marine patrol aircraft for the SA Air Force. In these national fleet demands, as you have pointed out, there may be opportunities for state- owned companies like Denel Aerostructures, including the offset requirements, maintenance opportunities, systems integrations and manufacturing of components.
My question, Minister, is: As the government regards the aerospace sector as strategically important, will you consider aligning all national fleet demands? [Time expired.] [Applause.]
Hon Deputy Speaker, the department is working together with other relevant departments. As we have mentioned, the Department of Trade and Industry and the Department of Defence and Military Veterans are aligning their programmes and policies with regard to fleet procurement to ensure that we are able to fulfil government policies through those programmes, such as localisation, skills development, pursuing industrialisation and ensuring that the work packages stay in South Africa. We will therefore continue to pay close attention to these. Insofar as our shareholder management model is concerned, as the department we have embedded these policies within the shareholder compacts with our state-owned companies to ensure that every programme that we implement is in compliance with these policies of the government. Thank you.
Madam Deputy Speaker, through you to the Minister, thank you for giving us a sense of how much government is helping Denel and the extent to which that is done in spite of the fact that there are other competing local businesses in the same area of production. The question is: Why should we continue to own Denel? Why should we continue to finance an arms manufacturer which, despite the overwhelming government support in procurement, cannot make a profit and continues to rely on the input of the overburdened taxpayers to keep itself afloat?
One appreciates the strategic considerations, but world experience teaches us that subsidies, whether they are direct or indirect, are like drugs; people get used to them. Perhaps, if Denel was left to compete in the marketplace by itself, it would produce weapons people want and would learn to fly at the economic level rather than continuing to rely on the state as its sugar daddy. Why are we doing that, Minister?
Hon Deputy Speaker, besides the fact that the hon Oriani-Ambrosini asks the same question in every Budget Vote and gets the same answer, the following year, he will come back and ask the same question again. The fact of the matter is that for a country such as South Africa, the ownership of a facility, of an institution such as Denel is strategic. We cannot dispose of a company with the capabilities that Denel possesses and then say the provision of defence equipment, particularly to the Department of Defence and Military Veterans, is going to be thrown to the private sector as their responsibility. Now, it is important that we should firstly be clear about that.
Secondly, it is inaccurate to say that Denel is a drain on the taxpayer. Denel's finances have been improving. The problem with Denel in the past was the Denel Saab Aerostructures contracts that they had entered into. Since the conclusion of the agreement between Denel and Airbus, Denel Aerostructures has been on a positive financial footing.
The company is improving and therefore contributing positively to the finances of the Denel group as a whole. Therefore, this company is making an important contribution to the South African economy and is critical in terms of the programmes that it supplies our country with, for example the development of skills and localisation. This answers what the question sought to ask - how it will contribute to the advancement of the aerostructures industry in our country. Thank you. [Applause.]
Hon Deputy Speaker, following the repeated requests for financial bailouts and fines received for price-fixing by SAA, also following Minister Gigaba's bold and correct step of firing the SA Express board following financial irregularities and the withdrawal of the parastatal's financial statements, does the Minister not agree that the massive drain on the public purse by SAA and SA Express, amounting to over R2,7 billion, should rather be used to provide clean drinking water, housing, basic sanitation, health care and basic education to South Africans and that the time has finally come to privatise SAA and SA Express? Thank you. [Applause.]
Hon Deputy Speaker, the question was Denel Aerostructures, but that notwithstanding, this is a new question about something different. You do not respond to any challenges of this nature through simplistic sleight-of-hand solutions, as is being suggested. [Interjections.] SAA and SA Express ensure the security of air travel to South Africa, a country that is on the southernmost tip of the African continent. During this period when most global airlines, including the privatised airlines, are in trouble, it is necessary that the South African government should support its national airlines to ensure that we are able to guarantee the movement of passengers for leisure and business to our country. We are not in the north, closer to the dominant global markets. We are on the southernmost tip of the African continent. If we fail to bring passengers to South Africa because the private airlines cannot do it, it is the South African economy that is going to suffer. Therefore, oversimplification of the problems and challenges faced by SAA and SA Express is not going to help. [Interjections.] I am confident that the government is paying the necessary attention to addressing the challenges faced by these two airlines. Having said that, hon Deputy Speaker, these were not the questions that I was asked under Question 151. [Applause.]
Steps to ensure that communications infrastructure remains a viable attraction for investors
163. Ms L L van der Merwe (IFP) asked the Minister of Communications:
Whether she has taken any steps to ensure that the communications infrastructure remains a viable attraction for investors to invest in after the Government declined South Korea's KT Corp from acquiring a 20% stake in Telkom; if not, what is the position in this regard; if so, what steps?