A source familiar with the matter told Reuters that Saudi Arabia has made a $1 billion bid for a broad partnership with South African state-owned defense group Denel. The partnership will include acquisition of a minority stake in a joint venture with Germany’s Rheinmetall.
Saudi Arabia, which is the world’s third-largest defense spender, is seeking partnerships to develop its own domestic defense industry with the goal of localizing half of its military spending by 2030.
The Kingdom’s state defense company, Saudi Arabian Military Industries (SAMI), said it was in discussions with all major South African firms and aimed to conclude the first deals by the end of 2018. The anonymous source revealed Saudi Arabia was targeting Denel’s 49 percent stake in Rheinmetall Denel Munition (RDM).
RDM, a South African-based joint venture formed in 2008 between Denel and Rheinmetall Waffe Munition GmbH, which holds the remaining 51 percent stake, specializes in the development, design and manufacture of medium and large-caliber ammunition including artillery shells.
After the killing of journalist Jamal Khashoggi in the Saudi consulate in Istanbul, the German government is currently reviewing all arms sales to Saudi Arabia. However, sources told Reuters that RDM operates independently and is subject to South African law, which means exports from the unit are not subject to German government oversight.
The offer from Saudi Arabia will see SAMI offer finance research and development in other Denel divisions. This includes Denel Dynamics, which develops and produces tactical missiles and precision guided weapons.
Under a new joint venture that would target defense export markets in the Middle East and North Africa, Denel and SAMI would share intellectual property. The Saudis expect an answer from the South African authorities by the end of December.
Speaking on the issue, the South African President, Cyril Ramaphosa said Denel was “ripe for joint-venture partnerships”. He said the government had not yet weighed the Saudi bid or the proposals of other suitors looking to partner with Denel.