Saudi Arabia makes $1 billion partnership bid with Denel

Saudi Arabia is said to be targeting Denel's 49 percent stake in Rheinmetall Denel Munition.

Saudi Arabia has made a $1 billion (R14.2 billion) bid for a broad partnership with South African state-owned enterprise Denel, according to a report by Reuters.

Denel is a loss-making (R1.7 billion loss for the 2017/18 financial year) state-run arms firm Denel, which manufacturers weapons, missiles and armoured vehicles for the South African armed forces and clients in Africa, the Gulf and Europe.

Two sources told Reuters that Saudi Arabia has made a bid for a broad partnership with Denel, which would include the acquisition of a minority stake in the company in a joint venture with Germany’s Rheinmetall.

The mooted joint venture is said to be part of Saudi Arabia’s ambitions to develop its own domestic defence industry and localising half of the kingdom’s military spending by 2030.

According to Reuters’ sources, Saudi Arabia was targeting Denel’s 49 percent stake in Rheinmetall Denel Munition (RDM).

RDM is a joint venture formed in 2008 between Denel and Rheinmetall Waffe Munition, which holds the remaining 51 percent stake. It specialises in the development, design and manufacture of medium and largecalibre ammunition, including artillery shells.

Saudi Arabian Military Industries, the kingdom’s state defence company, told Reuters in October that it was in discussions with all major South African firms and aimed to conclude the first deals by the end of 2018.

President Cyril Ramaphosa, whose presidency has focused on restoring governance at state-owned enterprises and shoring up their financial position, recently said Denel was “ripe” for joint venture partnerships after Saudi Arabia offered to take a stake in the weapons manufacturer.