India to buy SA arms - and help save Denel
President Cyril Ramaphosa has clinched a deal with Indian Prime Minister Narendra Modi that lifts the ban on SA's state-owned arms company Denel and allows it to do business with the Indian government.
Ramaphosa convinced Modi during a meeting on Friday that India should buy South African weapons from Denel after more than a decade of sanctions.
India's defence ministry blacklisted Denel after allegations of corruption in 2005. The ban was lifted last year after talks between Modi and Ramaphosa.
The deal struck in Delhi would make the country with the world's second-largest army (China has the biggest) a client and help save Denel from going under.
International relations minister Lindiwe Sisulu told the Sunday Times that for a long time India "did not believe Denel traded with integrity" and it had "clamped down on us".
She said problems with Denel were more than 10 years old and that "state capture did not help".
Ramaphosa also went on a charm offensive during his state visit to the Indian capital, a highlight of which was the deal that is expected to bring liquidity to Denel.
Denel lost R1.7bn in the past financial year because of mismanagement stemming from state capture.
"The president keeps emphasising the new dawn … We have been reiterating our position about corruption, openness and dealing honestly with people, and I think the world has understood that we have turned a new leaf and we can do business," Sisulu said in the interview.
Talks between the two countries about defence procurement began last year on the sidelines of the Brics summit and yesterday both heads of state celebrated the signing of an agreement.
"They [India's defence ministry] put together a package for Denel to start dealing with and it will be a prop for our own industry to get back on its own feet," Sisulu said.
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Last year, Saudi Arabia made an effort to save Denel with a $1bn bid for a broad partnership with Denel.
However, Sisulu said the Saudi deal was dead in the water after it caused a public furore.
"It was a suggestion from the Saudis and there were no further discussions on that matter," she said.
The minister also said that no part of Denel would be sold and Ramaphosa's administration was committed to getting the company back on its feet.
"There have just been serious management impediments," Sisulu said.
A senior international relations official in charge of the Middle East and Asia, Anil Sooklal, said that after Ramaphosa's election as president it had taken political intervention to mend the relationship between India's defence ministry and Denel.
"Prime Minister Modi said they want to deal with SA in defence procurement and joint ventures. India has looked into the defence sector and of course Denel is one of the leading arms manufacturing companies globally … So the environment is now clear to look at both countries in terms of defence space," Sooklal said.
But India would not give SA its business without a few concessions.
During the talks, India expressed concern about crime in SA and wanted assurances that once it invested in SA its personnel and property would be protected.
The Indians criticised SA's visa regulations that have made travel to SA difficult. Ramaphosa promised Modi that the visa regulations and structure would be re-examined to allow for easier travel from India to SA.
Ramaphosa received a warm reception from the Indian government. He also delivered the first Gandhi-Mandela lecture and addressed a business forum attended by Indian and South African business people.
He was the main guest of honour at India's Republic Day celebrations yesterday.