Saudi Arabia seeks wide-ranging partnerships with arms companies in South Africa

The Chief Executive Officer of the state-owned Saudi Arabian Military Industries (SAMI), Andreas Schwer, stated that Saudi Arabia is holding talks with South Africa’s largest arms manufacturer and is considering buying a stake in the state-run company Denel, a defence industry firm which currently undergoing a decrease in profits.

Schwer told Reuters that he expects the partnership deals with companies in South Africa to be finalised by the end of the year, without identifying those initial partners.

South Africa’s Department of Public Enterprises, which oversees Denel, acknowledged that talks were under way with the Saudi firm, but said it was too early to discuss details of any possible partnership arrangements.

Paramount Group, a private South African defence industry enterprise, claimed it is already holding talks with Saudi Arabian Military Industries.

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Schwer said: “To clarify, we are involved in a discussion process with all the major arms companies in South Africa, not just Paramount Group or Denel.”

Saudi Arabia ranks third in military spending after the United States, which ranks first, followed by China in second place. Saudi Arabia’s military budget last year was estimated at $70 billion.

Since 2015, the Gulf state has been waging war against the Houthi movement in Yemen. With limited local manufacturing capacity, Saudi Arabia is forced to import most of its military equipment.

The Saudi government is now seeking to develop its domestic defence industry to domesticate half of its military expenditure by 2030.

Schwer asserted: “The Saudi Arabian Military Industries aims to complete all external partnerships by the end of the year.”

He added: “We are holding discussions with the South African government to identify opportunities for strategic partnerships that could include equity investment on our part in Denel. The decision is not taken yet, but we are considering it as one of the options.”

More than 60 per cent of Denel’s revenues come from exports, but the company is currently suffering from a liquidity crisis after being involved in corruption scandals during former South African President Jacob Zuma’s rule.

SAMI’s CEO stated: “We aspire to have access to their technology. They have to be committed to transferring their technology to Saudi Arabia so that we can build together our local capabilities, not just in manufacturing, but also in engineering.”

Schwer explained that these same conditions apply to all partners of the Saudi Arabian Military Industries. In return, Saudi Arabia will provide access to markets distinctively and exclusively.