The best form of defence
South AfricaÔÇÖs isolated past has produced some highly versatile manufacturers but the trick now is to sell these skills to the world, as Alan Swaby learns.
ItÔÇÖs fair to say that South African defence equipment manufacturer Denel has not had an easy time of it over the past few years. As the companyÔÇÖs chairman Dr SP Sibisi states in the latest annual report, since 2005 the business has encountered four years of immense change and challenge. Faced with significant decreases in domestic defence spending and a global defence market which is largely inaccessible to independent contractors, Denel has had to redefine itself.
In other countries, the company might well have gone to the wall but the fact remains that Denel has amassed a considerable amount of skills that are simply not available anywhere else in South AfricaÔÇöskills the country canÔÇÖt afford to lose. As such, the Government is lending a financial helping hand while a reorganisation and restructuring starts to reap benefits.
The company has its roots back in the 1960s, under the guise of Atlas Aircraft Corporation, which was controlled by the Armaments Corporation of South Africa (Armscor). Due to international sanctions, South Africa developed significant home- based resources and was self sufficient in many aspects of military hardware. In the early 1990s, Atlas was absorbed into Denel, which was hived off from ArmscorÔÇöthe armaments wingÔÇöand each core competence was then set up as a business in its own right, complete with its own board of directors.
One such entity was Denel Saab Aerostructures which was split out of Denel Aviation in February 2007 when the Swedish aircraft manufacturer took a 20 per cent holding in the company. ÔÇ£One of the obstacles we face,ÔÇØ explains business development manager Grant Sampson, ÔÇ£is our geographical location, miles away from our principal markets in North America and Europe. Being linked with Saab provides us with greater access to markets as well as improving our performance capabilities.ÔÇØ
And those capabilities are quite formidable. Denel Saab Aerostructures, for example, is the only manufacturer in South Africa with aerospace quality composite skills. ÔÇ£In fact,ÔÇØ says Sampson, ÔÇ£we are quite self sufficient from engineering through to testing. We have had to develop these skills as there are precious few suppliers in the country we can turn to if needed.ÔÇØ
This lack of local manufacturing infrastructure is one of the factors that will determine the rate of growth Denel Saab is able to achieve. ÔÇ£We are trying to develop a pool of suppliers,ÔÇØ says Sampson, ÔÇ£and we often outsource machining that we could do in-house, simply to encourage others.ÔÇØ
The business is also limited by size as to what it can produce. Although it works on fuselages, it is unable to produce structures greater than about 10 metres in length. ÔÇ£Over the past few years,ÔÇØ says Sampson, ÔÇ£we have put a lot of effort into upgrading facilities and equipment. But our premises on the north side of JohannesburgÔÇÖs international airport have been purposely designed to focus on our core aerostructure products, which are limited in size.ÔÇØ
To give some idea of the variety of work produced by Denel Saab, it ranges from fuselage and tail boom plus main rotor and rotor head for the Agusta A109 helicopter, through the wing-to-fuselage fairing for the military version of the Airbus A400M, to the main landing gear fuselage section and NATO standard weapon pylons for the Saab Gripen jet fighter. In other words, an impressive array of composite, sheet metal, machining and airframe capabilities.
ÔÇ£We have invested heavily in the past few years,ÔÇØ says Sampson. ÔÇ£In the composite department there are three autoclaves and a five-axis router, ultrasound and X-ray test facilities as well as the pre-requisite clean rooms and storage freezers. On the sheet metal side there is a state-of-the-art fluid cell press plus the usual collection of stretchers and formers, as well as the necessary CNC machine tools.ÔÇØ
But perhaps the most impressive aspect of the setup is what comes before and after the actual construction. Visitors to the location are invariably impressed by the level of engineering skills on hand. Extremely complex work can be designed and detailed in-house using a CATIA platform; then once the work has been produced, it can be tested and certified for static, fatigue, hail and bird strike damageÔÇönot something that is readily found in-house in equivalent European manufacturers.
With no recognised broad base of suitable manufacturing skills in the country, it behoves Denel Saab to develop the skills that it needs. In order to reduce the impact of a rapidly ageing supervisory workforce, Denel Saab has what it calls an ÔÇ£incubation programmeÔÇØ, where students with the required engineering skills but not necessarily any experience are allocated to a mentor. Over a two year period, Denel is hoping to introduce 44 trained technicians and engineers, who will eventually move into key supervisory roles.
The short to medium term goal is to double production. Typically, throughput for the sub-assemblies Denel Saab produces is presently measured in single figures per month. Where output is currently four per month, the target is ten.
For some time, Denel Saab has been working with turnaround consultants, to develop performance indicators and set performance targets. Every one of the 800 employees has a performance contract with his or her line managerÔÇöso each person is well aware of the importance of their individual role in the success of the business and how their own performance is influencing the achievement of overall company targets.
Throughput has already been doubled, thus releasing capacity onto the shop floor. What is needed now are orders to soak up that capacity. Exchange rates are a major factor in pricingÔÇöall raw material comes from the northern hemisphere and thus a strong rand is a hindrance. Not that long ago, the exchange rate was R13 to $1; today it is R7.50, despite predications that it would weaken further.┬á
Nevertheless, Denel Saab has a strategy for increasing business. Whereas in the past it has focused its attention on the OEMs and tier one suppliers, it now intends targeting tier two, with the aim of capturing larger volumes of sub-assemblies. Sales campaigns aimed at the emerging markets of South America are also being planned.
