Transcript Facilities Management
The Aerospace Industry: Prospects for Co-operation Among the IBSA Countries
Dr Mills Soko Director, Mthente Research & Consulting Services (Pty) Ltd.
Senior Lecturer, University of Cape Town SAIIA Research Associate
Overview
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Project rationale & methodology.
Global context.
SA’s vision.
Findings.
Way ahead.
Project Rationale & Methodology
Purpose of report examine strategies for strengthening cooperation among IBSA countries in aerospace sector.
– Based on in-depth interviews with representatives of 5 SA aerospace companies.
• Denel.
• Aerosud.
• Reutech.
• Grintek.
• African Defence Systems.
– Interviews informed by semi-structured questionnaire.
Project Rationale & Methodology
– Questionnaire covered 7 areas.
• General.
• IBSA economic relationship.
• South-South cooperation.
• Capabilities.
• Value addition.
• Role of government.
• Threats.
– Also collected statistical information aerospace companies.
• Number of employees.
• Annual sales.
• Annual exports and imports etc.
about
Global Context
Aerospace industry key generator of wealth and driver of technological and economic development in industrialised countries.
Also crucial source of employment.
– E.g. In 2000, European aerospace industry employed 429 000 people.
Global aerospace sector poised to expand by 25% in real terms in next two decades to $250 billion per year.
Yet industry remains dominated by few economic powers.
Global Context
Annual sales of selected aerospace companies, 2000 Company Boeing Lockheed EADS BAE Systems Raytheon Northrop Thompson CSF Finmeccanica Denel Aviation SA Technical Country US US EU UK US US France Italy SA SA Annual sales (RB) 423 235 210 174 156 79 62 35 1.6 2.2 Military sales (RB) 130 188 52 139 125 56 43 17 1.4 0 A Strategy for Sustainable Economical and Growing Aerospace Industry, Pretoria: DTI, 2003 % Military 30% 80% 25% 80% 80% 70% 70% 50% 88% 0%
South Africa’s Vision
To develop aerospace sector as sustainable and growing industry by 2014.
To this end, government has sought to position sector transport hub.
as high-value global manufacturing industry and regional African DTI has unveiled Aerospace Industry Support Initiative (AISI) to bolster SA’s aeronautical, space and defence industries and encourage their full integration into global aerospace supply chains.
South Africa’s Vision
AISI seeks to achieve its objectives by: – Improving global competitiveness of aerospace industry.
– Providing an institutional platform for encouraging partnerships and innovation among government, industry and academia.
– Identifying, industry.
developing and promoting the interests and capabilities of the SA aerospace
Competitive Strengths
SA’s competitive strengths are in avionics, aerospace systems development, and production of airframes and engine components.
Other capabilities include inertial sensor systems, integrated logistical support and aircraft protection systems.
Findings: South/South Cooperation
Currently very little or no aerospace collaboration between IBSA countries.
Respondents agreed on need for coooperation, but important to clarify rationale for such cooperation.
– Is the objective of cooperating to compete with Boeing and Airbus? Or to have a sustainable high tech industry that can provide skilled employment while making available tailor-made products to global manufacturers at reasonable prices?
Findings: South/
South
Cooperation
Three areas of potential cooperation identified.
– First, expansion of aerospace supply chains, based on commercial opportunities offered by diverse capabilities of IBSA countries regional aircraft manufacturer.
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• Premised on prospects offered by Embraer, Brazil’s • From SA perspective, demand for regional aircraft in Africa expected to grow in the future, with commercial carrying capacity poised to double over the next 6 years.
• Provides opportunities for provision of SA-based aircraft maintenance, modification and upgrade infrastructure to service regional African fleet.
• Also potential to create employment and spin off companies.
Findings: South/South Cooperation
– Second, collaboration on aerospace systems in support of strategic defence needs.
• Global trend towards industrialisation of defence production offers opportunities for integrating domestic defence industry with global supply chains via international srategic alliances.
• SA engaged in discussions with Brazil with view to upgrading/replacing some of Brazil’s ageing airforce hardware – mainly fighter jets, but also supporting sub sytems. • Grintek made progress in entering Indian defence market – supplies Indian fighter aircraft with self-protection systems.
Findings: South/South Cooperation
Third, collaboration around small and micro satellites.
– Brazil and India have strong competencies in small and micro satellites, including launching capability.
– SA has small but reputable small and micro satellite industry and ground support infrastructure.
– Respondents called for more integrated approach in these fields.
• Exchange expertise and technology platforms, and foster closer working relationships between public and private sectors in IBSA countries.
Findings: Capabilities
Scope for developing better technological capabilities in aircraft and aircraft components production.
– SA aerospace industry could exploit its competitive niche areas to integrate SA manufacturers with Brazilian and Indian aircraft production sectors through, for example, risk-sharing development and government-supported marketing efforts.
– Concern that although IBSA countries have infrasctructure to develop vibrant aerospace sector, there was a lack of funding, a lack of defence coordination, and uncertainty about markets prepared to buy from IBSA grouping.
Findings: Capabilities
SA’s infrastructure capabilities vary: – Skilled personnel.
• SA universities offer useful courses.
• Aviation baseload underpins appoinment of new engineers. • Companies determined to further improve industry’s skills base • E.g. Aerosud plans to increase staff from 200 to 700 within 2 years to meet contractual obligations, has been investing in skills training in partnership with DTI & DST.
– R&D spending low, but growing thanks to AISI programme.
Findings: Capabilities
– Insufficient investment in manufacturing facilities and capital equipment.
• Some companies, especially Aerosud, have led the way in investing in modern production methods and in increasing production output.
– Insufficient financial resources. • The IDC is willing to offer financial support, provided a viable business case is made.
Findings: Value Addition
Europe and US high-cost manufacturers.
– This offers oportunities for emerging economies.
• But important to note that aviation is a high-risk business requiring very large upfront investments with long-term break even times.
Value addition instruments most likely to yield optimal benefits.
– Boosting R&D.
– Shared research.
– Joint marketing arrangements.
– Technological exchanges.
Findings: Role of Government
SA government’s approach to aerospace industry pro-active.
Government’s role is to: – Provide aerospace sector with strong direction.
– Collaborate with IBSA countries on projects.
– Address concerns around import duties, tariffs, manufacturing and investment incentives, and transaction costs.
– Provide subsidies for collaborative investment and manufacturing programmes.
Findings: Challenges/Threats
Corruption allegations levelled at Denel by Indian government.
Competition vs. Cooperation – Can IBSA countries develop common interest? Need for ‘win-win’ focus projects.
Problem of over-capacity and declining defence expenditure in Brazilian and SA defence industries. Indian/Brazilian attitudes to SA government’s BEE policy. Can SA’s Airbus/A400M strategy be balanced against imperative of South-South cooperation?
Way Ahead
Clear interest in SA in proposed aerospace programme.
DTI offered to host preliminary meeting of aerospace players in IBSA countries to explore ideas, proposals, plans and strategies that can take aerospace initiative forward.