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Future of the South African Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022

Future of the South African Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022

Summary

South African military expenditure, declined at a CAGR of 3.18% during 2013-2017. However, it is anticipated to register a CAGR of 4.35% during the forecast period, to value US$4.6 Billion in 2022. The country is an active participant in stability and peacekeeping operations governed by the UN (United Nations), African Union, and the Southern African Development Community, and, as such, seeks higher expenditure on the defense sector.

Capital expenditure is expected to increase at a CAGR of 4.39% over the forecast period, compared to the negative CAGR of 3.34% recorded during 2013-2017. The country is expected to cumulatively spend US$4.2 Billion over the forecast period on procuring defense equipment.

South African homeland security expenditure is expected to register a growth rate of 4.19%. This expenditure is primarily driven by South Africa’s focus on enhancing its defense capabilities to counter high violent crime rates and rising threats of global terrorism. Consequently, demand for surveillance equipment such as CCTV and biometric identification systems is expected to increase during the forecast period.

South African defense imports were highest during 2012-2014 due to the procurement of 26 Gripen aircraft. Aircraft accounted for the largest expenditure during this period, with Sweden the biggest supplier. The other import partners include Russia, the US, France, Israel, and the UK. Aircraft, engines, satellites, missiles, and sensors were the other imports during 2012-2016.

The report “Future of the South African Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022” offers detailed analysis of the South African defense industry with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.

In particular, it provides an in-depth analysis of the following -
- The South African defense industry market size and drivers: Detailed analysis of the South African defense industry during 2018-2022, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country’s expenditure and modernization patterns.
- Budget allocation and key challenges: Insights into procurement schedules formulated within the country and a breakdown of the defense budget with respect to capital expenditure and revenue expenditure. It also details the key challenges faced by defense market participants within the country.
- Porter’s Five Force analysis of the South African defense industry: Analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry.
- Import and Export Dynamics: Analysis of prevalent trends in the country’s imports and exports over the last five years.
- Market opportunities: Details of the top five defense investment opportunities over the next 10 years.
- Competitive landscape and strategic insights: Analysis of the competitive landscape of the South African defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.

Companies mentioned in this report: Denel, Ansys Limited, Reutech, Saab Grintek, IVEMA (Pty) Ltd, Aerosud, Global Armour, Milkor (Pty) Ltd, Paramount Advanced Technologies and Tellumat Defense.

Scope

- The South African defense budget valued at US$3.7 billion in 2017, a fall from US$4.2billion in 2013, and registered a CAGR of -3.18% during 2013-2017. Even though the actual budget increased in local currency, it showed a downward trend in terms of dollar value owing to variations in the exchange rate.
- During 2013-2017, an average of 19.8% of the country’s total defense budget was allocated to capital expenditure, while an average of 80.2% was reserved for revenue expenditure. Furthermore, capital expenditure is expected to remain constant over the forecast period. The South African Defense Force has expensive and advanced military equipment and the country will focus more on upgrade and maintenance activities over the forecast period. This had been neglected over the years due to insufficient funding and improper budget allocation, which resulted in gradual equipment wear and tear.
- The MoD is expected to invest in Infantry Fighting vehicles (IFV), transport aircraft and corvettes.

Reasons to buy

- This report will give the user confidence to make the correct business decisions based on a detailed analysis of the South African defense industry market trends for the coming five years
- The market opportunity section will inform the user about the various military requirements that are expected to generate revenues during the forecast period. The description includes technical specifications, recent orders, and the expected investment pattern by the country during the forecast period
- Detailed profiles of the top domestic and foreign defense manufacturers with information about their products, alliances, recent contract wins, and financial analysis wherever available. This will provide the user with a total competitive landscape of the sector
- A deep qualitative analysis of the South African defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts


1. Introduction
1.1. What is this Report About?
1.2. Definitions
1.3. Summary Methodology
1.4. About Strategic Defense Intelligence
2. Executive Summary
3. Market Attractiveness and Emerging Opportunities
3.1. Current Market Scenario
3.1.1. Primary Threat Perception
3.1.2. Military Doctrine & Strategy
3.1.3. Military Fleet Size
3.1.4. Procurement Programs
3.1.5. Social, Political and Economic Environment & Support for Defense Projects
3.1.6. Political and Strategic Alliances
3.2. Defense Market Size Historical and Forecast
3.2.1. South African defense expenditure expected to grow at a CAGR of 4.35% over the forecast period
3.2.2. Modernization initiatives, peacekeeping missions, and border security expected to drive defense expenditure
3.2.3. Military expenditure as a percentage of GDP is expected to increase during the forecast period
3.3. Analysis of Defense Budget Allocation
3.3.1. Capital expenditure share to remain constant over the forecast period
3.3.2. Capital expenditure expected to increase over the forecast period
3.3.3. ‘Others’ Defense accounted for the largest percentage share of the overall defense budget
3.3.4. Army expenditure to grow at a modest pace over the forecast period
3.3.5. Per-capita defense expenditure expected to increase over the forecast period
3.4. Homeland Security Market Size and Forecast
3.4.1. Homeland security (HLS) expenditure expected to value US$8.3 billion in 2022
3.4.2. Homeland security expenditure to be driven by rising threat of global terrorism and high violent crime rates
3.4.3. South Africa faces a Moderate level of threat from foreign terrorist organizations
3.4.4. South Africa has a score of 3.5 on the Terrorism Index
3.5. Benchmarking with Key Global Markets
3.5.1. South African defense expenditure expected to remain low compared to leading spenders
3.5.2. The country will continue to be a small player in the global defense market
3.5.3. South African defense expenditure as a percentage of GDP is lower than the majority of leading defense spenders
3.6. Market Opportunities: Key Trends and Growth Stimulators
3.6.1. Infantry Fighting Vehicles (IFVs):
3.6.2. Transport Aircraft:
3.6.3. Naval Vessels:- Corvettes
4. Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. Defense imports expected to remain constant during the forecast period
4.1.2. Sweden dominated South African defense imports during 2012-2016
4.1.3. Aircraft were the major defense imports during 2012-2016
4.2. Export Market Dynamics
4.2.1. Defense export value declined significantly during 2012-2016
4.2.2. Ecuador dominates South African defense export market during 2012-2016
4.2.3. Armored vehicles accounted for the majority of country’s defense exports
5. Industry Dynamics
5.1. Five Forces Analysis
5.1.1. Bargaining power of supplier: low
5.1.2. Bargaining power of buyer: Medium
5.1.3. Barrier to entry: Medium
5.1.4. Intensity of rivalry: High
5.1.5. Threat of substitution: Medium
6. Market Entry Strategy
6.1. Market Regulation
6.1.1. Offset policy ensures support for local companies
6.1.2. Declining FDI inflows impact business environment
6.2. Market Entry Route
6.2.1. Budgeting Process
6.2.2. Procurement Policy and Process
6.2.3. Foreign OEMs find alternative routes into the market
6.2.4. Joint ventures and collaborations provide market entry opportunities
6.3. Key Challenges
6.3.1. Corruption and bribery
6.3.2. Lack of transparency
6.3.3. Lack of relevant defense policy
7. Competitive Landscape and Strategic Insights
7.1. Competitive Landscape Overview
7.2. Key Public Sector Companies
7.2.1. Denel: overview
7.2.2. Denel: Major Products and Services
7.2.3. Denel: recent announcements and strategic initiatives
7.2.4. Denel: alliances
7.2.5. Denel: recent contract wins
7.2.6. Ansys Limited: overview
7.2.7. Ansys Limited: Major Products and Services
7.2.8. Ansys Limited: alliances
7.2.9. Ansys Limited: Recent Contract Wins
7.2.10. Ansys Limited: financial analysis
7.3. Key Private Sector Companies
7.3.1. Reutech: overview
7.3.2. Reutech: products and services
7.3.3. Reutech: recent announcements and strategic initiatives
7.3.4. Reutech: alliances
7.3.5. Reutech: recent contract wins
7.3.6. Saab Grintek: overview
7.3.7. Saab Grintek: products and services
7.3.8. Saab Grintek: recent announcements and strategic initiatives
7.3.9. Saab Grintek: alliances
7.3.10. Saab Grintek: recent contract wins
7.3.11. IVEMA: overview
7.3.12. IVEMA: products and services
7.3.13. IVEMA: recent contract wins
7.3.14. Aerosud: overview
7.3.15. Aerosud: products and services
7.3.16. Aerosud: recent announcements and strategic initiatives
7.3.17. Aerosud: alliances
7.3.18. Aerosud: recent contract wins
7.3.19. Global Armour: overview
7.3.20. Global Armour: products and services
7.3.21. Global Armour: recent announcements and strategic initiatives
7.3.22. Global Armour: alliances
7.3.23. Global Armour: recent contract wins
7.3.24. Milkor (Pty) Ltd: overview
7.3.25. Milkor (Pty) Ltd.: products and services
7.3.26. Milkor (Pty) Ltd.: recent announcements and strategic initiatives
7.3.27. Milkor (Pty) Ltd.: recent contract wins
7.3.28. Paramount Advanced Technologies: overview
7.3.29. Paramount Advanced Technologies: products and services
7.3.30. Paramount Advanced Technologies: recent announcements and strategic initiatives
7.3.31. Paramount Advanced Technologies: recent contract wins
7.3.32. Tellumat Defense: Overview
7.3.33. Tellumat Defense: products and services
7.3.34. Tellumat Defense: Recent announcements and strategic initiatives
7.3.35. Tellumat Defense: Alliances
7.3.36. Tellumat Defense: Recent contract wins
8. Business Environment and Country Risk
8.1. Economic Performance
8.1.1. GDP Per Capita
8.1.2. GDP, Current Prices
8.1.3. Local Currency Unit per US$
8.1.4. Exports of Goods and Services (LCU)
8.1.5. Imports of Goods and Services (LCU)
8.1.6. Gross National Disposable Income (US$ Billion)
8.1.7. Goods Exports as % of GDP
8.1.8. Goods Imports as % of GDP
8.1.9. Government Cash Surplus/Deficit as % of GDP
8.1.10. Service Imports as % of GDP
8.1.11. Service Exports as % of GDP
8.1.12. Foreign Direct Investments
8.1.13. Net Foreign Direct Investments as % of GDP
8.1.14. Market Capitalization of listed companies (US$ Bn)
8.1.15. Market Capitalization of listed companies as % of GDP
8.2. Minerals
8.2.1. Mining, Manufacturing, Utilities Output
9. Appendix
9.1. About SDI
9.2. Disclaimer
List of Tables
Table 1: South Africa’s Ground Forces Strength
Table 2: South Africa Navy Strength
Table 3: South Africa Air Force Strength
Table 4: South Africa - Ongoing Development and Procurement Programs
Table 5: South Africa - Future Procurement Programs
Table 6: South African Defense Expenditure (ZAR Billion &US$ Billion), 2013-2022
Table 7: South African GDP Growth vs. Defense Expenditure as Percentage of GDP, 2013-2022
Table 8: South African Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Table 9: South African Defense Capital Expenditure (US$ Billion), 2013-2022
Table 10: South African Defense Budget Share (%) Split by Services (Army, Navy, Air Force and Other), 2013-2022
Table 11: South African Defense Budget Allocations in ZAR Billion - Breakdown by Services (Army, Air Force, Navy and Others) 2013-2022
Table 12: South African Defense Budget Allocations in US$ Billion - Breakdown by Services (Army, Air Force, Navy and Others) 2013-2022
Table 13: South African Per-Capita Defense Expenditure (US$), 2013-2022
Table 14: South African Homeland Security Expenditure (ZAR &US$ Billion), 2013-2022
Table 15: Terrorism Index, 2017
Table 16: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Table 17: Methodology for Offset Credits
Table 18: South Africa Budget Formation Timetable
Table 19: Competitive Landscape of the South African Defense Industry
Table 20: Denel - Product Focus
Table 21: Denel - Alliances
Table 22: Denel - Recent Contract Wins
Table 23: Ansys Limited - Product Focus
Table 24: Ansys Limited - Alliances
Table 25: Ansys Limited - Recent Contract Wins
Table 26: Reutech - Product Focus
Table 27: Reutech - Alliances
Table 28: Reutech - Recent Contract Wins
Table 29: Saab Grintek - Product Focus
Table 30: Saab Grintek - Alliances
Table 31: Saab Grintek - Recent Contract Wins
Table 32: IVEMA - Product Focus
Table 33: IVEMA - Recent Contract Wins
Table 34: Aerosud - Product Focus
Table 35: Aerosud - Alliances
Table 36: Aerosud - Recent Contract Wins
Table 37: Global Armour- Major Products & Services
Table 38: Global Armour- Alliances
Table 39: Aerosud - Recent Contract Wins
Table 40: Milkor (Pty) - Major Products & Services
Table 41: Milkor (Pty), Ltd. - recent contract wins
Table 42: Paramount Advanced Technologies - Major Products & Services
Table 43: Paramount Advanced Technologies - Recent contract wins
Table 44: Tellumat Defense- Major Products & Services
Table 45: Tellumat Defense- Alliances
Table 46: Tellumat Defense- Recent contract wins 96"
List of Figures
Figure 1: South African Defense Expenditure (ZAR Billion), 2013-2022
Figure 2: South African Defense Expenditure (US$ Billion), 2013-2022
Figure 3: South African GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2013-2022
Figure 4:South African Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Figure 5: South African Defense Capital Expenditure (ZAR Billion),2013-2022
Figure 6: South African Defense Capital Expenditure (US$ Billion), 2013-2022
Figure 7: South African Defense budget Split Between Army, Navy, Air Force and Others, 2013-2022
Figure 8: South African Defense Expenditure in (ZAR billion), - Breakdown by Services (Army, Air Force, Navy and Others) 2013-2022
Figure 9: South African Defense Budget in US$ Billion - Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022
Figure 10: South African Per-Capita Defense Expenditure (US$), 2013-2022
Figure 11: South African Homeland Security Budget (ZAR Billion), 2013-2022
Figure 12: South African Homeland Security Budget (US$ Billion), 2013-2022
Figure 13: Terrorism Heat Map, 2017
Figure 14: Terrorism Index, 2017
Figure 15: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Figure 16: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2017 and 2022
Figure 17: Defense Expenditure as Percentage of GDP of Largest Military Spenders (%), 2017
Figure 18: Naval Vessels Market Size (US$ Million), 2017-2027
Figure 19: Transport Aircraft Market Size(US$ Million), 2017-2027
Figure 20: Corvettes Market Size (US$ Million), 2017-2027
Figure 21: South Africa Defense Imports Trend, 2012-2016 (TIV values)
Figure 22: South African Defense Imports by Country (%), 2012-2016
Figure 23: South African Defense Imports by Category (%), 2012-2016
Figure 24: South Africa Defense Exports Trend, 2012-2016
Figure 25: South African Defense Exports by Country (US$ million), 2012-2016
Figure 26: South African’s Defense Exports by Category (%), 2012-2016
Figure 27: Industry Dynamics Porter’s Five Forces Analysis
Figure 28: Ansys-Revenue Trend Analysis (2013-2017)
Figure 29: Ansys - Operating Income Trend Analysis (2013-2017)
Figure 30: Ansys - Net Income Trend Analysis (2013-2017)
Figure 31: South African GDP Per Capita, 2015-2025
Figure 32: South African GDP Current Prices, 2015-2025
Figure 33: South African LCU per US$ 2015-2024
Figure 34: South African Exports of Goods and Services (LCU), 2005-2014
Figure 35: South African LCU per USD, 2005-2014
Figure 36: South African Gross National Disposable Income (US$ Billion), 2005-2014
Figure 37:South African Good Exports as (% of GDP), 2005-2014
Figure 38: South African Good Imports as (% of GDP), 2005-2014
Figure 39: South African Goods Balance (% GDP), 2005-2012
Figure 40: South African Service Imports (% GDP), 2005-2014
Figure 41: South African Service Exports (% GDP), 2005-2014
Figure 42: South African Foreign Direct Investments (BoP, current US$ billion), 2005-2014
Figure 43: South African Net Foreign Direct Investments (% GDP), 2005-2014
Figure 44: South African International Reserves, including gold (US$ billion), 2005-2012
Figure 45: South African Market Capitalization of listed companies (% of GDP), 2005-2012
Figure 46: South African Mining, Manufacturing, Utilities Output (US$ billion), 2005-2014

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