South Africa needed to create financing institutions with capacity to fund the defence industry as it was an important feeder of jobs into the hi-tech environment, Paramount Group executive chairman Ivor Ichikowitz said recently.

The Paramount Group has announced that it has entered into a R1 billion partnership with the Kazakhstan government for the manufacture of armoured vehicles in that country.

Raising capital
Ichikowitz said it was very difficult to raise capital in South Africa for these kind of investments. Paramount was therefore raising finance internationally because South Africa had no structures that allowed the sector to raise capital for the industry in the domestic market.

“It’s not necessarily a matter of legislation. I think the issue is that South African institutions like the Industrial Development Corporation operations are restricted from providing capital to industrial projects. South African banks are also very much adverse to funding hi-tech projects in the defence industry,” he said.

“But the good news is there are people abroad who believe in our capacity and our ability and have supported us to make these investments.”

Paramount opened a new armoured vehicle factory in Kazakhstan with capacity of more than 200 armoured vehicles a year, creating 150 skilled jobs in partnership with the Kazakhstan government.

Kazakhstan Paramount Engineering is the first armoured vehicle factory in that country and the first defence plant with this scale of capability in central Asia. It also presents a new way of in-country defence manufacturing, where it transfers technologies and skills to its customer countries, creating joint projects, research and development, production and jobs.

The factory has started production of an indigenous version of Paramount’s armoured combat vehicle, the Marauder.

The new variant of the Marauder, called Arlan, is built for winter conditions and snow. It was designed and developed after extensive collaboration with the Kazakhstan military and rigorous trials to meet the Kazakhstan military’s specific operational requirements.

Ichikowitz said one of the biggest challenges the defence industry had in South Africa right now was that the government had a shrinking budget, and the amount of business that it was giving to the industry was declining.

“We have had a big loss of skills in the industry. It is critically important for both ourselves, Denel and other defence companies in the industry to find foreign markets so that we can grow our customer base and increase the number of jobs that we are creating, which then allows us to bring in new graduates into our business,” he said.

He said locally Paramount was running a bursary programme and a mentorship programme to bring young graduates into the industry, not only to teach them technically but also to teach them the business.

He said Paramount had a strategic alliance with the University of Potchefstroom, the University of Pretoria and Wits University where it provided bursaries to students at these institutions. In addition it was looking at much closer strategic collaboration to build curricula that better met the needs of the defence industry.

Industry future
“The future of our industry depends on our ability to train new entrants into the industry, and it is the single biggest priority that Paramount has. That is why projects of this nature are very important to us because if we can get the business, get the orders, it helps the ability to create new jobs,” he said.

He said despite the limitations it faced such as being privately instead of publicly owned, Paramount was pursuing strategic partnerships with corporations including Boeing.

“This is not just a breakthrough for Paramount, it is as well for Denel, as well as other privately-owned defence companies that are doing pioneering work; it will take South Africa’s defence industry to another level,” he said.

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