Our View: South Africa possesses the largest defence sector in Africa, and local manufacturers - a
growing number of which are entering into international product development partnerships - export items
such as armoured vehicles, artillery and defence electronics to a wide range of countries across the world.
Domestic demand for defence equipment remains strong, driven by Pretoria’s continued commitment to
regional peacekeeping, as well as the high levels of crime and social instability in the country, which
necessitate a broad military presence internally and along borders. Despite this, however, South African
defence expenditure remains limited, as the government budget continues to focus mainly on social and
economic development - leaving military spend as a percentage of GDP at just over 1%.
In 2015, Pretoria has committed to another year of military support to the DRC, agreed to cover the first
standby period for the African Capacity for Immediate Response to Crises (ACIRC) force and continue its
counter-piracy patrol off the East African coast (albeit without support from the air force). The SANDF will
need to maintain its border security presence in the face of heightened levels of transnational crime and
illegal immigration, while at the same time be prepared to deal with any escalation in violence caused by
social instability. Despite these factors, however, the defence allocation in the 2015 national budget
represents another year-on-year (y-o-y) decline in real terms, illustrating the government’s continued
reluctance to increase sector spending as a percentage of the total. The ruling African National Congress
(ANC), widely criticised for poor service delivery, has lost support from large sections of the electorate in
recent quarters, and major budget increases for the military would prove unpopular with many voters - not
least because of the corruption allegations that have historically surrounded ARMSCOR contracts.
BMI therefore expects overall defence expenditure for the year to drop by 3.7% y-o-y, reaching a total of
USD3.6bn.