Open Arms for the Prodigal Son?: The Future of South Africa's Arms Trade Policies

Susan Willett
Centre for Defence Studies, Kings College, University of London

Published in African Defence Review Issue No 17, 1994

INTRODUCTION

Like a prodigal son South Africa is about to return to the international community, but will it be welcomed with open arms? In spite of the fact that profound changes are taking place, South Africa has yet to earn legitimacy in the eyes of the international community. The effect of the UN arms embargo remains and its reputation as a pariah state lingers on1. To overcome this legacy South Africa needs, as one precondition among others, to transform radically its arms trade policies, both its sources of supply and its export practices. In short, it needs to develop a more open and transparent approach to its arms transfer policies, before the international community will accept it into the fold unconditionally.

The seeds of debate about the future of South Africa's arms trade policies have been sown, but are by no means unequivocal. On the one hand there are those who argue, mainly on moral grounds, against South Africa's involvement in the arms trade and who believe that the country's international standing would improve if exports were curtailed2. On the other hand, there are those who argue that South Africa has made such significant investment in developing arms production capacities that it makes little economic sense to withdraw from such activities and, now the arms embargo is lifted, the defence industry is well-placed to increase its exports in certain types of weapons systems3. Any understanding of this debate has to be set within the context of past policies and practices, but also to be seen against the changing strategic and economic enviroment within which South Africa currently finds itself.

Despite the dichotomy of opinion which exists, there is a persistent core of consensus that the legacies of past practices are both deleterious and extraneous to the future of South Africa's international standing and that major changes in arms trade policies need to take place. The question is how restrictive or liberal future policies should be and what the issues are that surround such choices. In addressing these concerns this paper explores the nature of South Africa's arms trade and reflects on the room for manoeuvre in the new enviroment. The final part of the paper raises important questions about the principles and guidelines that should direct a responsible and legitimate arms trade policy for the future. What the paper does not set out to do is to be prescriptive in the sense of defining an 'ideal' of what South Africa's arms trade policy should be in a perfect world. Rather, it is concerned with the immediate legacy of the apartheid system and how the new regime can begin to move towards a more progressive arms trade policy. This approach has been adopted because of the recognition of the very real barriers to exit from the defence market and problems associated with attempts at conversion, particularly in the context of severe recession, high unemployment and the political instability resulting from the profound transition taking place in South Africa at present.

THE ARMS TRADE LEGACY

Any analysis of South Africa's arms trade is compounded by the shroud of secrecy which enveloped all aspects of South Africa's defence activities under the apartheid regime. South African arms acquisitions and sales were of an exceptional clandestine nature owing to the mandatory United Nations arms embargo on exports to and the considerable international pressure to avoid arms imports from South Africa.

Secrecy was institutionalised by the South African state in the Armaments Development and Production Act which prohibits the disclosure of any information regarding the acquisition, supply, marketing, importation, export, development, manufacture, maintenance or repair, and research into armaments4. In addition, the Special Defence Account Act ensures that the facts behind South Africa's overseas sales have been hidden from public scrutiny5. As Navias has commented:

There emerged then, no means of analyzing the scale and scope of transfers, of openly debating arms production values, and of assessing arms sales and arms procurement policies. In essence there were no public fora in which the benefits and costs of arms trade options could be thrashed out.6

Whereas the 1968 and 1974 Acts provided the legislative structure that maintained an unparalleled degree of secretiveness, the covert culture which evolved within the Armaments Corporation of South Africa (Armscor) was far more deep-rooted and insidious. Armscor has been associated with shady dealings involving international arms smuggling, corruption and even murders.7

The evolution of South Africa's arms import and export policies were closely linked to the development of the South African Defence industry8. During the period 1976-1990 the ideology of 'total onslaught' was launched for the militarisation of society as resources for war were moblised on political, ideological and economic levels. Factors such as the mandatory 1977 UN arms embargo, the military involvement in a number of regional conflicts such as in Namibia and Angola, intensified the rationale for the development and expansion of an indigenous arms industry9. Before 1963 South Africa spent 70% of its defence budget on procurement from overseas, most of it from the UK. By 1984 almost 100% of its equipment was procured from within South Africa, from the domestic defence industry10. Landgren has argued that successes of the South African arms industry are directly attributable to the UN arms embargo. An argument which was supported by a South African delegate to the UN who declared after the imposition of the 1984 embargo that 'The outcome of the embargo was the creation of an efficient industry for the manufacture of arms of all types necessary for South Africa's self defense, with the result that we are today self-sufficient in a number of important armaments sectors.'11

The defence industrial expansion was co-ordinated by Armscor, the state-run arms procurement and manufacturing corporation. The experience of isolation from the international community, the sense of siege and the need for technology to build up an indigenous defence industrial capability led AMSCOR to adopt surreptitious methods of operation. The outcome was that Armscor accessed technology through the grey and black areas of the international arms market12. It used front companies to disguise sources of supply and focused on relations with other pariah states such as Israel and Chile. Joint marketing operations where set up with other states and companies acquiescent with selling South African products under cover of a facade, an example of this practice being the connection between Armscor and the Chilean company Cardoen13. In addition South African agents operated illegally in many countries in an attempt to gain access to weapons or military-related technology. 14

Despite the mandatory embargo a large number of multinational firms, such as Racal Siemens, Plessey and Thompson CSF maintained close but covert links with South Africa's defence industry. It is thus no coincidence that some of South Africa major weapons platforms have their origins in Western defence systems. For instance, the Atlas CSH-2 Rooivalk anti-tank/attack helicopter is heavily dependent on French designs. It made its debut in 1993 at the Dubai international airshow. The Olifant tank is based on the British Centurion tank, although it has been modified to the point where it can be described as a new tank. The military satellite system built by Houwteq was assembled in a plant designed and built by Seimens. In some cases multinational companies hived off local operations but links were maintained as a conduit for technology transfer, for instance in the case of Plessey South Africa Ltd. It was claimed that this company only produced commercial telecommunications equipment during the time of the UN arms embargo. Nevertheless, it is now well-placed to contribute to South Africa's defence export revival.

Indeed, Landgren points out that the origins of all the major sub-sectors of the South African defence industry are rooted in foreign technology. For instance the production of sub-machine guns and modern rifles are based on Israeli and Belgian designs; the aircraft industry evolved with French and British aid although structured around US and Italian designs; the naval industry and the construction of ship-to-ship missiles was based on Israeli assistance; the nuclear industry was based on technology transfer from the United States, France and Germany; military vehicles were based on upgraded British and French models and; electronics and communications technologies were developed with the help of British and US companies based in South Africa15. This essential dependence on foreign technology transfer questions the notion of South African self-sufficiency in arms production. All the evidence suggests that, in respect of most major weapon systems, South Africa is still dependent on external sources of technology for major innovations in military technologies. However, though indigenous production the dependence on foreign suppliers was profoundly changed, in that know-how was acquired which cannot be reversed, and the ability to supply its security forces was maintained.

As well as importing military-related technology South Africa began to export its military technology successfully in the early 1980s16. In 1981-82 South African arms exports were estimated at a value of $23 million. By the late 1980s this had increased to $500 million, with sales in over 30 different countries. According to a number of strategic analysts South Africa had become the tenth largest arms supplier in the late 1980s. Armscor has the primary responsibility for issuing marketing and export permits allowing South African defence companies to operate on the international arms market. In 1993 the complete restriction on information concerning weapons sales was lifted in an attempt to earn international recognition. The first annual report on Armscor's activities was published in June 1993 and reveals that in FY 1992/93 Armscor issued 407 marketing permits, 246 export permits and 40 import permits17. During this period R46,5 million (£9m) worth of equipment was sold to countries in the Americas, the Middle East and Africa. Armscor also administers counter-trade contracts and during 1992/93 seven of its contracts involved counter-trade to the value of R1 026 million (£205m). Many of its traditional markets have been with fellow pariah states, similarly excluded from access to major sources of supply. For instance it sold arms to both sides in the Iran/Iraq war, to the Pinochet regime in Chile, to the Khmer Rouge in Kampuchea and to Renamo in Mozambique. South Africa has been implicated in supplying key technologies to Iraq for its nuclear programmes.18

The government's programme of military self-sufficiency led to the establishment of production capabilities across a broad spectrum of military technologies viz., aircraft, artillery, armoured vehicles, long-range missiles, naval vessels and nuclear weapons. Armscor itself expanded its production operations to encompass nine subsidiaries by the late 1980s and sub-contracted to 975 private sector companies. It traditionally guaranteed defence contractors high profit margins through a 'cost plus' contract system. In addition, defence firms benefited greatly from many years of subsidised R & D and capital investment programmes. The combined effect of these factors with the arms embargo means that South Africa's defence firms have been isolated from normal commercial practices and competitive markets. Due to the mandatory UN arms embargo, South Africa's defence sector enjoyed a particularly privileged resource position, in terms of access to capital and skilled labour. The production culture, both private and public, has been geared towards low volume production, (with few economies of scale) product rather than process innovation and little cost discipline as risks and profits were guaranteed by a protected state market. The system of production which has evolved under these conditions is highly centralised and hierarchical and tends to be defined by large-scale systems integration.

Under these conditions South Africa's defence industry emerged as one of the major industrial sectors of the economy, employing a total of almost 130 000 people - roughly 10 % of total manufacturing employment in the 1980s19. In 1989 the sector contributed 4,5 % to GDP and 19,2 % to the value of total manufacturing output. Arms exports were the largest category of manufactured exports by value and the third largest after gold and coal. The defence sector also represented the greatest convergence of skilled workers, technological and manufacturing capacity and proficiency in the country.

However, as a result of the end of the war Namibia and the recognition that apartheid had to go there were significant shifts in the government's spending priorities. Since 1989 the defence budget has been almost halved. As a percentage of total government expenditure, defence spending decreased from 15,7% to 8,2% between 1989 and 1993, and as a proportion of GDP decreased from 4,3% to 2,6% over the same period. Substantial procurement cuts have meant that the government is no longer able to sustain the level of defence industrial capabilities that it had in the past. This had a detrimental effect on the defence industrial base in both the public and private sectors.

The improved external security enviroment, changing budgetary priorities and industrial contraction have forced a major rethink of government policy towards the defence industrial base. Attempts are being made to commercialise the defence sector by restructuring Armscor, which has been split into two organisations. The residual Armscor is now solely responsible for acquiring defence equipment and Denel comprises all the former Armscor production facilities. Denel now falls under the jurisdiction of the Ministry of Public Enterprises, as opposed to Armscor which remains with the Ministry of Defence. The establishment of Denel at arm's length from Armscor has enabled the latter organisation to introduce greater competition and a degree of 'marketisation' into its procurement policies, in an attempt to gain greater value for money from diminishing defence budget20. Despite Denel's new status viz-a-viz Armscor, there have been grievances made to the Complaints Board from private sector defence companies that Denel is being favoured by Armscor over private sector contractors. Also, that Denel has a unfair advantage acquired through the advanced facilities it inherited from Armscor.

The government, concerned about maintaining core defence production capabilities, has assigned Armscor the task of initiating and managing a special Industry and Technology Survival Programme (ITSP). During FY 1991-92 the ITSP was provided with R220 million (£41m). The major consideration of this programme is to distinguish critical capabilities and key technologies within the defence industry which need to be retained. An additional component of the project is support for a small number of technology demonstrator programmes focused on the integration of key generic technologies for the development of new weapon systems. Armscor is continuing with its Technology Development Programme IDP, though at reduced funding levels, to ensure that South Africa retains the ability to develop 'state-of-the-art' defence equipment. The TDP received R91m from the Defence Research and Development Council in 1992/93 and an additional R30 million was provided from Armscor's own funds.

Defence firms, whether state-owned or private have attempted to adjust to the new market conditions by reducing their workforces, cutting down on R & D and capital expenditure, rationalising and consolidating their production activities, diversifying into new markets and pushing for new export markets21. The volume of domestic arms production in 1992 fell to its lowest levels since 1977 and it is estimated that approximately 60 000 jobs, roughly half of the 1989 total, have been lost in the defence sector in the last five years.

Officially, Armscor has been promoting industrial conversion and diversification within the arms industry, but the general climate of recession and the lack of substantial investment resources has meant that conversion has produced few tangible results and certainly not stemmed the huge loss of jobs. In the absence of conversion success, arms export promotion has taken on increasing importance for job- and technology-retention. Set against the socio-economic costs of the downturn in defence expenditure, the policy of export-promotion has widespread support across the political spectrum, including key players in the trade unions and the ANC.

The promotion of arms exports is seen as a means of retaining national industrial capabilities. To promote arms sales South Africa held its first public show of defence equipment in an exhibition in Johannesburg in November 199222. Despite the UN Arms embargo over 200 official visitors from 46 different countries attended. In addition to the domestic arms fair the South African arms industry has begun vigorously to promote its products at international arms fairs. Since 1992 it has attended fairs in Chile, London and Abu Dhabi. South Africa's presence at these fairs was accepted by the United Nations Security Council, despite the fact that these actions constituted a violation of UN 421 Arms Embargo and the UNSC resolution 765 adopted in July 1992 which 'urges the international community to maintain the existing measures imposed by the Security Council for the purpose of bringing an early end to apartheid in South Africa'.23

There is also evidence that some South African defence companies are still actively engaged in covert arms supplies despite Armscor's attempt to clean up the image of the defence industry. In March 1993 President dos Santos of Angola was reported to have written to the UN Secretary General to complain about covert arms supplies to the Unita rebels in Angola from South Africa24. The most recent scandal has involved the supply of South African arms to war-torn Rwanda25. A report from the New York-based Human Rights Watch points out that 'the influx of weapons from foreign sources to both sides contributed significantly to needless and abusive civilian deaths and suffering26. Armscor provided 10 000 rifle grenades, an equal number of R4 automatic rifles, plus 20 000 high explosive grenades, Browning machine guns and over 1,5million rounds of ammunition. Such reports are bound to feed the international community's continuing suspicions about South Africa's arms trade practices and create pressure for the new government to clean up its act.

THE FUTURE POLICY TOWARDS THE ARMS INDUSTRY AND TRADE

The mandatory UN arms embargo has been lifted now the government of national unity is in place, following full democratic elections in April 1994. Influential members of the ANC, while in favour of promoting arms sales, have expressed a willingness to adopt a more open and restrained policy. There would be obvious foreign policy advantages if restrictive policies were introduced. In the first place it would symbolise a distinct break with past clandestine practices. Secondly, South Africa would be sending a lucid message to the international community that its intends to adopt a new code of conduct as a re-entrant into the international community. The political legitimacy gained by such action could well translate into economic and political benefits.

The argument for the trade to continue is mainly an economic one, in that arms transfers contribute to South Africa's hard currency earnings, balance of trade and skilled employment while reducing the unit costs for weapons procured for the SADF27. A secondary consideration in favour of arms sales relates to political advantages. Weapons sales help to win friends and influence people. Nowhere is this more true than in Africa where South African arms sales are increasingly seen as a major foreign policy lever. Navias goes so far as to argue that 'arms transfers and sales may underpin regional security arrangements that could be established'.28 Indeed, many African states seem more than willing for South Africa to take on the mantle of regional security provider and have been courting Pretoria in recent months in an attempt to reduce reliance on major Western suppliers. In order to avoid dependence on the US many African governments would probably prefer to buy from the South African government, particularly as it is dominated by the ANC. Nigeria, Angola, Botswana, Zimbabwe and Namibia have all made noises to this effect.

But perhaps the most influential arguments in favour of arms sales are linked to debates about the retention of the South African arms industry. There appears to be strong support for maintaining the defence industry across the political spectrum29. Nevertheless, even a new government with a strong commitment to the defence industrial base will have to make difficult choices about the size and shape of the future defence sector because of continuing budgetary constraints. There will be many pressing social and economic issues which the government will be obliged to address, given the high expectations of a newly-empowered population. For its own legitimacy spending on education, welfare, health and sanitation must take priority over defence expenditure. In addition to internal pressures the government may face external pressures from institutions such as the IMF to keep defence expenditure low. The IMF wants to see developing countries keep defence spending below 2% of GDP. In future this may be a term of condiitonality before loans are made to a client state.

The future shape of the industry will also depend on the type of defence and security policy the future government adopts. With the end of the war with Namibia and the ending of the Cold War, South Africa no longer faces a major military threat either regionally or internationally. this suggests that South Africa's future force structure could be dramatically reduced. While it is hard to speculate about the precise shape of South Africa's future defence policy, certain features are likely to be included: the adoption of a more defensive posture; the phased withdrawal of the South African Army from its internal policing role; an increased involvement in a regional defence force and in international peacekeeping operations; a shift from a conscript-based army to a fully professional volunteer force.

These changes from the present structure and orientation of the SADF will have implications for the types and quantities of weapons systems that the new armed forces will require. This will entail not only the replacement of obsolete hardware with new equipment but also the upgrading and maintenance of existing equipment. These products and services can either be supplied by local suppliers or by imports. Even if the future government prioritises procurement from domestic sources, budgetary constraints will still force a choice over which capabilities and strategic technologies should be maintained and which should be abandoned. In part, these difficult decisions may be determined by the export-competitiveness of South Africa's defence products.

If the new government decides to continue to promote arms export, then it will have to expand its existing client base, as many of its former recipients are pariah states. This means identifying new markets. The question is whether, outside the small enclave of pariah states, alternative markets exist. Certainly there is an excess of supply in the international market place which does not bode well for a late market entrant.30 But, on the other hand, South Africa produces military equipment appropriate for many Third World clients and at prices they can afford. Moreover, it brings to the market place recently tried and tested equipment which has acquired international repute. But more than this, for many states South Africa represents an alternative source of supply which enables Third World states to reduce their dependency on the major suppliers.

The Middle Eastern and Far East Asian markets are being targeted as potential growth markets. Armscor is confident that South Africa could increase its arms sales by 400% now the embargo is lifted and this may not be over-optimistic31. Many South African land-based systems are thought to be eminently suitable for other Third Would markets, being battle-proven and appropriate to the defence needs of small-to medium-sized countries. For instance, the United Arab Emirates and Qatar have shown considerable interest in equipment designed for terrain and climate similar to that in the Arabian desert. Although never confirmed, Qatar is thought to have bought twelve G5 155mm towed field howitzers from Armscor in 1991 and the UAE acquired the LIW G6 155mm self-propelled field howitzer the same year32. The Saudi Arabian police force has bought a number of mine protected military APCs and there is considerable interest in the Rooikat AFV which is capable of defeating an MBT, as it is a wheeled vehicle with speed and manoeuvrability superior to those of a large tank.

In the Far East, Thailand has already received frequency-hopping military radios and has expressed interest in the Rooikat armoured reconnaissance vehicle. The G5 and G6 155mm artillery guns are expected to sell well in this region. Other systems Denel is marketing aggressively in the region include: the FT5 shoulder-launched anti-tank weapon; a remotely-piloted reconnaissance plane; mine protection equipment; and updates for the French Mirage III jet fighter and the Centurion tank33.

As South Africa enters the international arms market as a legitimate trader it will face the growing pressures on both the demand and supply sides of the international arms market, which are forcing a major structural adjustment of the global defence equipment sector. A rapid process of international restructuring and globalisation of defence production is taking place34. The forms of globalisation include; cross-border restructuring of ownership; a variety of international co-operation schemes between companies; foreign investment; international sub-contracting; and international licensing and international joint ventures. These bear many similarities to the transnationalisation of commercial production which occurred in civil sectors from the 1960s onwards35. To survive in this cut-throat enviroment without the protective mantle of state support the South African defence industry will need to internationalise its operations. There is some evidence that this process has begun. Interestingly enough, South African defence firms are turning to other Third World arms producers rather than to the major suppliers. For example Saudi Arabia has been discussing the possibility of South Africa aiding the development of a future defence equipment industry with local financing and Pretoria's technology, although there is some way to go before such agreements are likely to materialise36. South Africa has already assisted China North Industries Corp. in the development of its 155mm gun with the supply of components. Denel is reportedly seeking a Far East Asian partner to help in the development and production of the Rooivalk attack helicopter. Denel believes that the Rooivalk is an economical alternative to the US-built Apache or European Tiger. Denel has already entered into a number of joint developments with Charted Industries of Singapore (CIS) including the development of smart artillery munitions and laser designators37.

It is known that some of Denel's subsidiaries have sought co-operation arrangements with Western European suppliers but so far the terms which Western firms insist upon are regarded as unacceptable by South African managers38. There is some indication that South Africa is looking to Eastern Europe and Russia for co-operation and technology transfer. The executive chairman of Armscor, Johan Moolman, was reported to have said 'Co-operation with Eastern Europe could ease budgetary cuts... technology transfer with Eastern Europe would be easier than with North America, Western European or Asian countries39.' In February the South African Navy purchased a Russian Arctic supply ship to replace the 35 year old SAS Tafelberg. The Juvent is a multi-role ice-strengthened ro-ro ship; it cost $13,6m, considerably cheaper than a locally-produced ship which would have cost an estimated $40 million. The Juvent is to be re-fitted at Simonstown40. It is understood that South Africa's ageing Mirage F-1s are undergoing a modernisation programme in conjunction with Russia's Mikoyan and Klimov enterprises. Moscow has also offered to launch South Africa's observation satellites at one-quarter the price of Western launch facilities41.

One aspect of the international arms market which is perceived to be a growth area is retrofitting. Many countries facing budgetary constraints are unable to purchase new weapon systems but they can afford to modernise existing weapons platforms, by upgrading their communications, weapons systems etc. Certain South African arms firms are well placed to expand into this market as they already have considerable experience in this field. During the Angolan war it captured a variety of land equipment including T-72 tanks for which it has developed a series of improvement packages. Denel has identified this area as a growth market, particularly as many of the armed forces of its neighbouring countries are equipped with Soviet equipment.

While South Africa begins its outward reach for legitimate partners in the international market many established supplier countries are targeting South Africa as a potential market for arms exports now the arms embargo has been lifted. In one instance they have already jumped the gun, by getting in orders before the arms embargo was lifted. The Swiss firm Pilatus has secured the sale of 60 Pilatus PC-7 training aircraft which was announced in February 1993. This agreement was met with condemnation. The UN Security Council demanded that the sale be stopped, but the UN has little power over Switzerland as it is not a UN member42. Opponents in Switzerland claim that it breached the War Material Act on arms exports. Under both external and internal pressure, the Swiss government has insisted that Pilatus modify the aircraft to prevent the carriage of weapons. In South Africa opponents, including ANC members, argue that a locally-manufactured aircraft, namely the New Generation Trainer (NGT) called Ovid, developed by Aerotek (an arm of the Council for Scientific and Industrial Research) and Atlas Aircraft Corporation, should have been procured43. But, as the chief of the Airforce, General James Kriel, commented:

We would have liked to support our local aviation industry more fully. The problem is that we no longer have the money to support all facets of the industry. Given that limitations, we decided to concentrate on avionics, electronic warfare and weapon systems, rather than on airframes44.

The low numbers of aircraft required by the South African Air Force (SAAF) would not have made the NGT competitive against established trainers like the Brazilian-built Tucano and the Swiss PC -7/945. This case is a good illustration of the type of difficult choices that will increasingly have to be made in the future. The crucial challenge facing both the defence industry and the government will be achieving the right balance between off-the-shelf purchases, domestic production and ensuring that the industry specialises in those areas in which it is likely to have comparative advantage in the international market.

Many other countries are vying for arm sales. UK companies, for example, are being encouraged by the Foreign Office to explore the South African market for the possibility of sales or co-operative ventures (see Appendix). Agreements can be made and deliveries will be allowed now the UN ban is lifted. There are a number of weapon systems that the British Ministry of Defence has recently decommissioned which it hopes to sell to the South Africans, e.g., Hunter Killer Submarines. Delegations from the South African Navy have been invited to the UK by the MoD to discuss possible sales among other forms of co-operation. UK defence companies have identified a number of potential opportunities such as the need for a front-line combat aircraft such as the Hawk 200 built by British Aerospace. In anticipation of the arms embargo being lifted, British Aerospace moved its regional office from Harare to Johannesburg and is seeking new partnerships in what it hopes will be a growing market.

FUTURE DOMESTIC CONTROL OF SOUTH AFRICA'S ARMS TRADE

To earn legitimacy in the eyes of the international community South Africa will have to improve its arms trade practices and policies. The clandestine practices of the past reinforced the international community's conception of South Africa as a pariah state. During the apartheid era the costs connected with such activities may have been a price worth paying in the eyes of the South African regime, but a democratically elected government will no doubt want to disassociate itself from such a disreputable system by establishing a more open and transparent arms transfer policy and one that conforms with the requirements of international arms control regimes.

Ensuring greater accountability and transparency will require a number of institutional changes on different levels. A first step is to ensure that the Defence Force and procurement executive come under civilian political control through the establishment of a civilian Ministry of Defence. The next step must be to establish formal mechanisms of control and monitoring, such as parliamentary accountability, budgetary reports, the public right to information, a legislative framework for export control policies and mechanisms, the regular issue of end-user certificates and effective monitoring process to ensure the destination of weapons transfers. In addition there will be a need to create mechanisms such as public audits and information on licence applications. Because of the clandestine nature of the defence industry in the past and its associations with the apartheid state there is considerable internal demand for openness and accountability. There will no doubt be strict limitations on secrecy, other than for the technical specifications of weapons systems. It has been proposed that a parliamentary committee comprising elected delegates of all parties represented in parliament should be set up to scrutinise defence sales. Its ongoing scrutiny would be reported to the general public on an annual basis.

Some measures have already been taken to gain international legitimacy, particularly in the field of nuclear weapons. On 24th March 1993 President De Klerk announced that South Africa's six nuclear devices had been dismantled. All of these were destroyed in 1989-90 before South Africa's accession to the Nuclear Non-Proliferation Treaty in July 1991. As a state that developed a nuclear deterrent capability and then dismantled it, South Africa has created a precedent for others states. More importantly it has developed ways that this can be achieved to the satisfaction of neighbouring states. The condition for joining the NPT is agreement not to export nuclear weapons, nuclear plans and nuclear technology to non-nuclear weapon states. However, as a major producer of enriched uranium and uranium enrichment technology, South Africa should consider joining the Nuclear Suppliers Group (NSG) which agrees to restrict the supply of critical dual-use technologies and form closer ties with the International Atomic Energy Authority as a way of enhancing the international community's trust in South Africa's non-proliferation intentions.

The government has also applied to join the Missile Technology Control Regime (MTCR). South Africa's involvement in the development of ballistic missiles and space launch vehicles raised much anxiety about its possible role in the transfer of these technologies. The US has insisted that as a condition of MTCR membership South Africa destroy its ballistic missiles and satellite launching facilities because of the technological similarity to missile launchers. Although South Africa has completed the dismantling of its launcher, this stipulation has generated a degree of hostility towards the Americans, as it has created launching problems for South Africa's commercial observation satellite, Greensat. Managers of Houwteq, the satellite production company, believe that such conditions have commercially disadvantaged the company and that such policies actively discriminate against countries such as South Africa, while leaving the technologies of major suppliers intact, thus conferring unfair competitive advantages in certain space technology fields. South Africa is not alone in feeling that the US approach is discriminatory. Distrust of US intentions amongst South Africa's defence managers has contributed to the search for co-operative partners in Eastern Europe and Russia.

South Africa will gain respect if it adopts greater international transparency in its conventional arms transfers. The South African authorities responded to the United Nations Conventional Arms Trade Register by claiming that it was 'currently unable to contribute' because of UN Security Council Resolution 418 (1977) which imposed the arms embargo on the country. Now the embargo is lifted South Africa will have no excuse for failing to participate in the Register. The function of the Register is to create greater transparency in international arms transfers. Hence it will be in the interest of the new government to comply with submission in the coming year to prove its greater willingness to be more open and transparent than the former regime. Navias argues that;

While many will debate the merits of the register as an international confidence building mechanism, adherence to its requirements may provide South Africa with a number of benefits. A responsive attitude will certainly go some of the way towards legitimising South Africa's arms trade.

Finally, the new South African authorities should consider adopting a Code Of Conduct for arms transfers. Initiatives of this nature are being proposed both within the European Union and the United States where they could become institutionalised in the future. The essential premise of such codes is that weapons should not be transferred to states which do not have democratically elected governments, that abuse human rights or are at war or in areas of severe tension. Such a code of practice has built-in restrictions which comply with the international norms of arms control and would certainly earn South Africa merit.

CONCLUSION

The future of South Africa's arms trade policy is not an open-and-shut case. There are many difficult dilemmas which confront the new decision makers, not least the socio-economic impacts of its policy options at a crtitcal time in the country's political evolution. It seems that the new administration is likely to continue trading in arms, but in a more responsible and less clandestine manner. However, controlling the activities of an industry to which clandestine activities are a norm, will be a test for the new government, particularly if internal tensions and conflict escalate. While Armscor and Denel have shown a willingness to open up their operations to greater public scrutiny and to enter into dialogue with the ANC about the industry's future, a deterioration of the internal security situation in South Africa may lead to a less co-operative posture. In this context the question of ownership and control of such strategic assets as the defence industry will be of immense importance to internal security.

Certainly the ANC is aware of this possibility, of the need to retain the defence industry under strict national control and resist attempts to privatise the industry. In theory state control should make transforming and controlling Denel's activities easier than if the industry was in private hands. However, as a nationalised industry there will be considerable pressure on the state to continue to subsidise defence production and trade, in order to maintain employment. This is likely to result in the maintenance of a larger defence industrial base than would survive under market-driven conditions. This in turn would encourage the government to export arms in order to reduce its domestic burden. Ultimately maintaining a highly subsidised defence industrial base has considerable opportunity costs for the transition economy. At the same time export maximisation is likely to conflict with compliance with international regimes and the adoption of a code of conduct. The latter might well restrict the number of potential defence markets, making it difficult to maintain the required level of exports from legitimate markets. A classic catch-22 situation.

A privatised industry is likely to be smaller, more competitive and less of a burden on the exchequer. Controlling its activities would, require very strict controls and monitoring and stiff penalties for non-compliance. Of course, there would be adjustment problems with the further downsizing of the industry, which cannot be regarded lightly. Employment - generation and economic development are the prerequisites for a successful transition process, and the ability of the defence industrial sector to adjust to a new market enviroment, given its centrality to the manufacturing sector and technology base, will be one of the tests of the new system.

For the international community the test will be whether South Africa is accepted back into the fold unconditionally and supported in its difficult and contradictory transition process. Or whether strict conditions are imposed, which could contribute to problems of internal stability. In return for compliance South Africa should fight hard for recompense through international aid and loans which could help redress the problems of defence industrial adjustment. Such a trade-off would have benefits not only for South Africa, but for the global community. Conditions without recompense could mean that South Africa finds the internal price for external compliance too high and is forced to stay out in the cold.

The UK operated a ban on the sale of arms and related material in accordance with UN Security Council Resolution 418/1977. This was binding in law upon members states and meant that export licenses would not be issued for any goods intended for either the South African military or paramilitary police. The ban also applied to military equipment for South Africa generally and was likely to remain in force until a democratic constitution is in place. Dual-use equipment can only be supplied to South Africa where there is no military connection with a particular order.

The UN arms embargo has been implemented in the UK by the Export of Goods (Control) Orders as well as the South African (United Nations Arms Embargo) (Prohibited Transaction) Order 1978, as amended. Licensable goods are listed in the Export of Goods (Control) Order 1992, as amended. This takes account of the UK's commitments under the UN (Sanctions) Order SCR 392, 1976 which covers the arms embargo.

In addition to the normally controlled range of goods, such as military equipment and machinery specially designed to produce such equipment, there are a few other items which the UK specifically controled for export to South Africa. These items include certain aircraft and aircraft parts including related technologies.

During 1992, South Africa acceded to the Non-Proliferation Treaty and also gave assurance that it does not possess any nuclear weapons or other nuclear explosive devices or undeclared nuclear materials, nor does it operate any clandestine nuclear facilities. Concern, however, still exists about some of the countries that South Africa remains associated with and for this reason South Africa is one of a number of destinations which are subject to special export licensing procedures. This means that export licenses can take longer to process than those for other destinations.

ENDNOTES

The first arms embargo against South Africa was formulated in Security Council Resolution 181 of 7th August 1963. It called for the voluntary cessation of the export of arms and military related equipment. This was followed by resolution 182 of 4th December 1963, covering all equipment and materials for arms production in South Africa. These two were replaced by the mandatory embargo (that is, binding for all nations) declared in Resolution 418 of November 4th 1977. In addition to the sale of arms and material for arms production the mandatory embargo covered co-operation with South Africa on the development and manufacture of nuclear weapons. In 1984 resolution 558 was introduced requesting all nations to refrain from importing arms, ammunition and military vehicles produced in South Africa. For a detailed insight into the effectiveness of the UN embargoes on South Africa see Landgren S. (1989) Embargo Disimplimented: South Africa's Military Industry, SIPRI, Oxford University Press.



See Cock J. (1993) South Africa's Arms Industry: Strategic Assets or Moral Cesspool? Paper presented to the Military Research Group Conference on Arms Conversion and Trade, Johannesburg, South Africa, June 28-30.



See Navias M. (1993) Towards a New South African Arms Trade Policy, African Defence Review, Issue No 13.



Statutes of the Republic of South Africa, Defence Armaments Development and production Act, No 57, 1968.



Statutes of the Republic of South Africa, Defence Special Account Act, No 1674.



Navias M. (1993) Towards a New South African Arms Trade Policy, African Defence Review, Issue No 13, p 38.



Even as recently as May 1993, the African Fund, a US human rights group reported to the press that US shot-guns, ammunition and other small arms were illegally exported to South Africa via Zimbabwe, where they have been used in attacks on anti-apartheid activists. A company with alleged links with Armscor received the weapons. Inter-Press Service International News 5/5/93.



For details of the structure of the South African defence industrial base see Batchelor P. (1993) The Future of South Africa's Defence Industry, paper presented to seminar of South Africa's Defence Industry, Centre for Defence, December 1993, and Buys A. (1993) The Case for the Retention of the Arms Industry, paper presented to the MRG Workshop on Arms Trade and Conversion in a Democratic South Africa, Johannesburg, 28-30th June..



Cock J, Introduction, in J. Cock and Nathan (eds) War and society: The militarisation of South Africa, St. Martins Press, New York 1989.



Landgren S. op.cit. p 9.



Quoted in Landgren op. cit. p 9.



In August 1992 a special task force headed by South Africa's top fraud investigator raided the offices of an Armscor sub-contractor and seized documents relating to illegal international arms deals. Among the cases investigated was an arms shipment in contravention of the UN arms embargo to the former Yugoslavia. Apparently an Air Uganda Boeing 707 was forced to land in Zagreb and was found to be carrying 19 tons of rifles, mines and ammunition with South African markings.



SA in pact with CIA, Israel and Chile sold arms to all and sundry, Southscan, Vol 7 No 45 November 27, 1992.



For instance South African agents attempted to gain access to the latest British anti-aircraft missile technology from Belfast based Shorts Brothers in exchange for money and guns for loyalties para-militaries. See Richard Dowden, Guns, missiles, blueprints and the Ulster connection, Independent, 15 July 1992. For further details of how the UN arms embargo was evaded see Landgren S. op. cit.



Landgren, op. cit, pp 16-17.



Baynham S, Security strategies for a future South Africa The Journal of Modern African Studies, Vol 28, No 3, 1990. However, this statement is hard to substantiate given the covert nature of its truncations.



Armscor, Armscor Annual Report 1992-1993, Pretoria, South Africa, p 16.



Southscan, op cit.



Batchelor, P, op. cit.



The removal of the State's protective mantle from the public sector defence industrial base is seen as a first step towards deregulating and privatising the defence sector.



Batchelor, op. cit.



Jane's Defence Weekly, 12 September 1992, p 28.



UN arms embargo ban ignored, Anti-Apartheid News, August 1992.



In May 1993 the South African government negotiated a deal involving Angolan oil in return for halting arms supplies to the rebel leader Jonas Sivimbi and his Unita forces. Karl Maie, South Africa makes a deal with Angola, Independent, 3 May 1993.



Guardian, 5 March 1993



Quoted in Southscan, vol 7.



See Navias op. cit, p 40.



Navias op. cit, p 41



See Bernie Fanaroff, The Arms Industry -industrial Relations and Industrial Policy, African Defence Review, No 11, 1993. Andre Buys The Case for the Retention of the Arms Industry, MRG Workshop on Arms Conversion and the Arms Trade, Johannesburg 28-30th June.



Estimates of over capacity in the international arms industry are put at 30 % overall but in some niche markets over capacity is as high as 50 %.



Buys A, op. cit.



Beaver P, Courting in the Gulf Region, Jane's Defence Weekly, 13 February 1993.



Lewis P, South African Arms Firm Embraces New Opportunities in Asia, Defence News, 4 September 1992.



For an excellent discussion of the internalisation of defence production see Skons E. Western Europe: internationalisation of the arms industry in Wulf H. (ed) 1993, Arms Industry Limited, SIPRI, Oxford University Press. pp 160-190.



For a classification of the forms of internationalisation of industrial activities see OECD Industry Committee, (1992) Globalisation of Industrial Activities: Four Case Studies, OECD, Paris.



Jane's Defence Weekly, 14, November 1992.



S Africa Arms Firm Embraces New Opportunities in Asia, Defence News, 28 September - 4 October 1992.



Interview with the Managing Director of Houwteq, a Denel subsidiary, July 1993, the Cape, South Africa and December 1993, London.



Industry looks to Eastern Europe, Jane's Defence Weekly, 5 December 1992.



Arctic Ship Goes South, Jane's Defence Weekly, 27 February 1993.



Moscow missiles offer to Pretoria, Financial Times, 19 January 1993



Daily Telegraph, 4 February 1992.



Pilatus export faces resistance, Jane's Defence Weekly, 17 April 1993.



Ibid.



The contract with Pilatus does, however, involve a 55 % offset arrangement. Of this total 25 % is for military work in avionics and electronic warfare.