8.1.4 The Aerospace and Defence Industry: Clusters and Industrial Parks

Challenges of the South African Aerospace and Defence Industry

• The previously mentioned Aerospace Industry Sector Development Plan (the AISDP) as well as the current Aerospace and Defence Master Plan, noted the specific challenges that must be addressed in the formulation of a future strategy for the CAV. The development of CAV Landside and Airside facilities and services will allow CAV to capitalise on some challenges that are mentioned below: • The SA market for aerospace services is too limited to offer marketable justification for the existence of an SA industry, and the industry must thus position itself for continental and global participation. The most accessible clients, and those that are best accessed through the Industrial Participation strategy of the dtic, are the major aerospace OEMs; • The major aerospace OEMs are all attempting to reduce costs and to simplify their supply chain logistics through outsourcing functions that are niche and do not have an economic justification to retain them to the SMMEs. The SMME-type companies could successfully establish direct supply to these OEMs by physical positioning themselves closer to the OEMs and share supply chain logistics, thus rationalising the establishment of an industrial park such as the CAV; • The aerospace industry is characterised by the necessity for stringent regulatory controls, mainly as a consequence of safety standards. Global supply chains also require that major suppliers invest heavily in quality and process approvals standards and certification and associated specialist training. The costs of such approvals in many instances acts as a barrier to entry for smaller companies; • The aerospace industry is exceedingly dependent upon specialized competencies. These competencies are strongly dependent upon track record and having and established experience base. These competencies are also often as a result of years of Research and Development and significant intellectual property (IP) generation. It is therefore not realistic to base a strategy upon an expectation that new entrants will immediately acquire the core competency necessary for participation in especially the higher tiers of the overall supply chain. Core competency are historically vested in a few existing companies, not all of which can presently be considered B-BBEE-compliant, hence the strategic need to support and create new sustainable SMMEs and B-BBEE compliant companies to achieve broadening economic participation and equity in the sector; • The industry is competing in the international arena and for it to be able to make inroads in this global industry, the local industry requires an Industrial Park Development of a scale that should be able to allow a supplier competing in the local industry to market itself as an international role player through an association with such a Park

Development; • Further to the above challenges, the limited government stewardship in the South African industry is currently perceived to be the biggest issue by aerospace industry players, followed by sporadic demand. Accordingly, government must strengthen its participation in supporting the aerospace industry by various means, including leveraging on Public

Procurement and other methods of funding. In this regard, the Joint Aerospace Steering

Committee (JASC) was established many years ago to coordinate the aerospace industry. for collective gain;

• The aerospace industry also requires significant investment in infrastructure (at the level of physical infrastructure, machinery and plant equipment. This is all the more important, if a move towards new high technology manufacturing methods such as

Additive Manufacturing (AM) and high speed machining, is already an established need for domestic sector sustainability and growth. In order for South Africa to be able to deepen its manufacturing capabilities and move into knowledge-intensive value chain, a tremendous amount of industry upgrading will be necessary. The various governmental incentive schemes such as the Industrial Policy Action Plan (IPAP), the Black Industrialist

Program, Invest SA, the Aerospace Industry Support Initiative (AISI) as well as, financing opportunities offered by agencies such as Industrial Development Corporation (IDC) and National Empowerment Fund (NEF) at national, provincial and local government levels are very handy in strengthening and upgrading the technological and industrial manufacturing capabilities, and must be utilised to their fullest; • Slow progress has been made toward transformation in the sector. The industry is not as yet representative of the South African population and the new B-BBEE codes require a more aggressive approach to Broad-Based Black Economic Empowerment. • High barriers to entry for new entrants into the market due to various reasons such as access to funding, inherently high system complexity vs. that within the low volumebased sectors. Plus, the sector in South Africa is relatively small and insular.; and • Finally, there is an insufficient pipeline of incubated sub-tier supplier companies and skilled personnel (both at the artisan and engineering levels) to absorb current knowledge and experience, and an insufficient intra-governmental co-ordination for industry-specific and structured support.

The limited availability of funding for the development of infrastructure, bulk services and facilities at CAV needs to be evaluated and challenged for the CAV Landside and Airside Developments to succeed in contributing to the selected sectors of the economy meeting the mentioned challenges